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Today's Headlines Bank Indonesia

  • Update Indonesia: Interest Rate, Fuel Subsidies & Current Account Deficit

    The central bank of Indonesia (Bank Indonesia) announced today (after the Board of Governors’ meeting) that it keeps the benchmark interest rate (BI rate) at 7.50 percent. The lending facility rate and the deposit rate are maintained at 7.50 percent and 5.75 percent, respectively. Agus Martowardojo, Governor of Bank Indonesia, said that interest rates were maintained as the country’s current account deficit narrowed to 3.07 percent of gross domestic product (GDP) in the third quarter of 2014.

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  • Forecast: Bank Indonesia Expected to Keep Key Interest Rate at 7.5%

    The central bank of Indonesia is expected to keep its key interest rate (BI rate) at 7.50 percent at the next Board of Governors’ meeting (scheduled for Thursday 13 November 2014) in anticipation of accelerated inflation triggered by higher prices of subsidized fuels. The Indonesian government plans to raise prices of subsidized gasoline and diesel before the end of the month in an attempt to curb the country’s wide current account deficit and reallocate government funds to more structural or productive activities than fuel consumption.

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  • Indonesia’s Foreign Exchange Assets Rise to $112 Billion in October

    The central bank of Indonesia announced on Friday (07/11) that the country’s foreign exchange reserves grew slightly in October 2014. At the end of the month, the reserves stood at USD $112 billion (from USD $111.2 billion at the end of the previous month). The central bank said that these reserves increased mainly on government export receipts in the oil & gas sector, as well as growth of banks’ foreign currency deposits at Bank Indonesia. This growth exceeded government external debt payments.

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  • Islamic Finance in Indonesia: Sharia Banking is Large Untapped Potential

    Islamic Finance in Indonesia: Sharia Banking is Large Untapped Potential

    Having the world’s largest Muslim population and experiencing sustained economic growth at a pace of +5 percent implies that Indonesia harbours great potential for Islamic finance (sharia banking). However, Indonesia is yet to tap the full potential of the Islamic financial services market. As an illustration, with a figure of USD $24 billion, Indonesia’s Islamic banks only held 4.9 percent of the country’s total banking assets in 2013. This is small compared to Malaysia (where Islamic banking holds a 20 percent market share).

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  • GDP Growth Indonesia Update: What about Economic Growth in Q3-2014?

    Economic growth in Indonesia is expected to continue to slow in the third quarter of 2014 according to the country’s central bank. Bank Indonesia Deputy Governor Perry Warjiyo said on Thursday (30/10) that the institution believes gross domestic product (GDP) growth of Southeast Asia’s largest economy to reach 5.1 percent year-on-year (y/y) in Q3-2014, similar to the GDP growth result in the previous quarter (5.12 percent, y/y). Main reason for this slowing pace is the sluggish global economy and particularly the case of China.

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  • Bank Indonesia’s Governor Supports Higher Subsidized Fuel Prices

    Agus Martowardojo, Governor of Bank Indonesia, is highly supportive of president-elect Joko Widodo’s plan to increase prices of subsidized fuels before the end of the year as this move would help to diminish the country’s structural current account deficit as well as improve the trade balance. Widodo, who will assume office on 20 October 2014, is expected to raise prices of subsidized fuels by between IDR 1,000 and 3,000 per liter, and relocate state funds to social and economic development.

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  • Bank Indonesia: Foreign Exchange Reserves Unchanged in September

    The official foreign exchange reserve assets of Indonesia’s central bank (Bank Indonesia) at end September 2014 were unchanged (from the preceding month) at USD $111.2 billion. Based on a Bank Indonesia statement, the reserves were under pressure due to an increase in foreign exchange demand (for government foreign debt payments and foreign exchange intervention in order to stabilize the Indonesian rupiah exchange rate), but supported by a global Islamic bonds issuance, oil & gas export revenue and growth of bank forex deposits.

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  • Consumer Confidence in Indonesia Falls Slightly in September

    A survey of Indonesia’s central bank (Bank Indonesia) shows that Indonesian consumer confidence declined slightly to 119.8 points in September 2014 (from 120.2 points in the previous month) on concerns that price increases will limit people’s purchasing power. These concerns are triggered by president-elect Joko Widodo’s plans to raise prices of subsidized fuels before the year-end in an effort to safeguard the country’s financial fundamentals. Widodo (popularly known as Jokowi) will be inaugurated on 20 October 2014.

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  • Economic Update Indonesia: Inflation, Trade Balance & Manufacturing Activity

    Statistics Indonesia (BPS) released various economic data today (01/10) - including inflation, the trade balance and manufacturing activity - that give a good indication about the state of the Indonesian economy. Although not all data was positive, market participants were content, evidenced by an appreciating rupiah exchange rate and rising Indonesian stocks. Based on the Bloomberg Dollar Index, the rupiah appreciated 0.43 percent to IDR 12,135 per US dollar, while the Jakarta Composite Index climbed 0.06 percent on Tuesday (01/10).

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  • Higher Interest Rates in 2015 Could Further Limit GDP Growth of Indonesia

    The economy of Indonesia, which has been slowing since 2011, will have difficulty to rebound in 2015 as the central bank’s key interest rate (BI rate) is expected to be raised again to avert capital outflows brought on by higher interest rates in the US and to combat accelerated inflation after domestic subsidized fuel prices have been raised by the new government led by president-elect Joko Widodo (Jokowi). After a GDP growth pace of 6.5 percent (y/y) in 2011, economic growth in Southeast Asia’s largest economy fell to 5.8 percent (y/y) in 2013.

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Latest Columns Bank Indonesia

  • Bank Indonesia's Loosening Monetary Policy: Impact of Lower Interest Rates

    Bank Indonesia's Loosening Monetary Policy: Impact of Lower Interest Rates

    In the first three policy meetings of 2016, Indonesia's central bank (Bank Indonesia) cut its benchmark BI rate gradually yet aggressively from 7.50 percent to 6.75 percent as inflation, the rupiah rate and Indonesia's current account deficit were regarded as 'under control'. At the same time, Indonesia's lender of last resort acknowledged the BI rate has failed to influence borrowing costs and market liquidity effectively and therefore decided to adopt the seven-day reverse repurchase rate (reverse repo) as the nation's new benchmark starting from August 2016.

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  • Bank Indonesia Revises Down 2016 Economic Growth Projection

    Bank Indonesia Revises Down 2016 Economic Growth Projection

    The central bank of Indonesia (Bank Indonesia) revised down its projection for Indonesia's economic growth in 2016 to the range of 5.0 - 5.4 percent (y/y), slightly below its previous forecast in the range of 5.2 - 5.6 percent (y/y). Bank Indonesia Governor Agus Martowardojo said the central bank decided to trim its projection for gross domestic product (GDP) growth this year due to sluggish global economic growth, low commodity prices, and Indonesia's slightly disappointing Q1-2016 GDP growth figure at 4.92 percent (y/y).

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  • Update Indonesia's Q1-2016 Balance of Payments & Current Account

    Update Indonesia's Q1-2016 Balance of Payments & Current Account

    Indonesia's balance of payments registered a deficit in the first quarter of 2016. Based on the latest data from Indonesia's central bank (Bank Indonesia), the deficit stood at USD $287 million in Q1-2016, down from a USD $1.3 billion surplus in the same quarter last year. The balance of payments deficit was the result of the nation's Q1-2016 capital and financial transaction surpluses (USD $4.17 billion) not being able to cover the current account deficit (CAD). Indonesia's Q1-2016 CAD shrank to USD $4.67 billion, or 2.14 percent of the nation's gross domestic product (GDP).

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  • Indonesia in April: State Budget & 7-day Reverse Repurchase Rate

    Indonesia in April: State Budget & 7-day Reverse Repurchase Rate

    If we look back on the month of April, two important matters - related to the economy - occurred in Indonesia this month: (1) in the first week of April, the Indonesian government managed to complete the Revised 2016 State Budget (RAPBN-P 2016), and, one week later, (2) the central bank (Bank Indonesia) announced it will adopt a new benchmark monetary tool per 19 August 2016 - the so-called seven-day reverse repurchase rate - that is to replace the existing BI rate (which fails to influence market liquidity effectively).

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  • Central Bank & Indonesia's Statistics Agency Expect Deflation in April 2016

    Central Bank & Indonesia's Statistics Agency Expect Deflation in April 2016

    The central bank of Indonesia (Bank Indonesia) expects to see deflation in April 2016 on the back of controlled food prices as the harvest season has arrived. Bank Indonesia Governor Agus Martowardojo said a central bank survey shows deflation of 0.33 percent month-to-month (m/m) during the first three weeks of April. Besides lower food prices, Martowardojo also attributes April deflation to the government's decision to cut fuel prices (premium gasoline and diesel) by IDR 500 (approx. USD $0.04) per liter per 1 April. This move led to a 4 percent drop in public transportation tariffs.

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  • Bank Indonesia Adopts New Reference Rate: 7-day Reverse Repurchase Rate

    Bank Indonesia Adopts New Reference Rate: 7-day Reverse Repurchase Rate

    The central bank of Indonesia (Bank Indonesia) announced on Friday (15/04) it will adopt a new monetary tool per 19 August 2016 that is to replace the existing BI rate which is considered too inefficient to influence market liquidity as it is not directly tied to Indonesia's money markets. The seven-day reverse repurchase rate (reverse repo), which stood at 5.50 percent in the central bank's last auction, is to become the nation's new benchmark. Bank Indonesia Governor Agus Martowardojo, who communicated through a teleconference from Washington DC, emphasized that the central bank will not change its monetary stance.

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  • Bank Indonesia Cuts Key Interest Rate Again by 0.25%

    Bank Indonesia Cuts Key Interest Rate Again by 0.25%

    In line with expectation, the central bank of Indonesia (Bank Indonesia) cut its benchmark interest rate (BI rate) by 25 basis points to 6.75 percent on Thursday (17/03) at its two-day policy meeting. It is the third straight month of monetary easing in Southeast Asia's largest economy. In the preceding two months the lender of last resort had also cut borrowing costs by 0.25 percent, each month. Furthermore, the deposit and lending facility rates were also cut by 25 basis points to 4.75 percent and 7.25 percent, respectively (effective per 18 March 2016).

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  • Bank Indonesia Expects Deflation in February 2016

    Bank Indonesia Expects Deflation in February 2016

    The central bank of Indonesia (Bank Indonesia) expects to see deflation at 0.15 percent month-to-month (m/m) in February 2016. Bank Indonesia Governor Agus Martowardojo said lower (government) administered prices in combination with low core inflation will be the recipe for deflation in the second month of the year. The lower administered prices that are primarily the cause of deflation consist of fuel prices, air fares and 12-kilogram liquefied petroleum gas (LPG) canisters. In the first month of the year Indonesian inflation accelerated to 4.14 percent (y/y).

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  • Bank Indonesia Remains Committed to Tight Monetary Stance

    Bank Indonesia Remains Committed to Tight Monetary Stance

    The central bank of Indonesia (Bank Indonesia) is expected to keep its benchmark interest rate (BI rate) relatively high in order to safeguard Indonesia's financial stability in 2016 (instead of seeking accelerated economic growth through a rate cut). Despite easing pressures on inflation and the country's current account balance, Bank Indonesia Governor Agus Martowardojo said that persistent global uncertainty (referring to the looming US Fed Fund Rate hike and China's slowdown) justifies the tight monetary stance.

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  • Does Bank Indonesia Have Room to Cut its Key Interest Rate?

    Does Bank Indonesia Have Room to Cut its Key Interest Rate?

    As Indonesia's inflation rate has eased to 6.25 percent (y/y) in October 2015 from 6.83 percent (y/y) in the previous month, and given that Indonesian inflation will ease more markedly in the last two months of 2015 as the impact of the subsidized fuel price hike in November 2014 will vanish, the central bank of Indonesia (Bank Indonesia) seems to have more scope to cut its current relatively high benchmark interest rate, hence giving rise to accelerated economic activity.

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