In line with our estimates the central bank of Indonesia (Bank Indonesia) left its interest rates unchanged at the January policy meeting that was held on 16-17 January 2019. The benchmark BI 7-Day Reverse Repo Rate was held at 6.00 percent, while the deposit facility and lending facility rates were kept at 5.25 percent and 6.75 percent, respectively.
It was the second straight month without changes to Indonesia’s interest rate environment. This may be an irrelevant fact, but we had not seen two straight months without higher interest rates in Indonesia since April 2018. Bank Indonesia was in fact among the most aggressive central banks in Asia last year in terms of interest rate hikes, raising its benchmark from 4.25 percent in April 2018 to 6.00 percent in November 2018.
Main reason for Bank Indonesia’s aggressive monetary approach last year were the strong pressures that pushed the Indonesian rupiah to a 20-year low against the US dollar. Biggest source of these pressures was monetary tightening in the United States where the Federal Reserve raised its benchmark interest rate four times by 25 basis points in 2018.
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This articles discusses:
• update on Bank Indonesia's monetary policy
Read the full article in the January 2019 edition of our monthly research report. You can purchase the report by sending an email to firstname.lastname@example.org or a WhatsApp message to the following number: +62(0)8788.410.6944