The central bank of Indonesia (Bank Indonesia) announced that the country's foreign exchange reserves rose USD $4.7 billion to the level of USD $127.76 billion at the end of July 2017. Growth of forex assets was primarily attributed to foreign exchange receipts, including the government's issuance of global bonds, tax revenues and government oil & gas export proceeds. Lastly, the auction of Bank Indonesia foreign exchange bills also added forex receipts.

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In local Indonesian media it is reported that Indonesian President Joko Widodo has given his blessing to the central bank (Bank Indonesia)'s plan to redenominate the rupiah. Bank Indonesia has already prepared a draft bill on the redenomination of the Indonesian Rupiah with the aim to improve economic efficiency and to create smoother commercial transactions. While the rupiah value would remain unchanged, the draft bill eyes to remove the last three zeros on all rupiah bills and coins.

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Indonesia's central bank (Bank Indonesia) concluded its Board of Governors Meeting later than usual on Thursday evening (20/07). However, there were no surprises. At the July policy meeting Bank Indonesia decided to keep its benchmark interest rate - the 7-day reverse repurchase rate - at 4.75 percent, in line with analyst estimates. Meanwhile, the deposit facility and lending facility were kept at 4.00 percent and 5.50 percent, respectively, effective per 21 Juli 2017.

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Since November 2016 we had seen six consecutive months of rising foreign exchange reserves in Indonesia. However, this trend ended in June 2017. The central bank of Indonesia (Bank Indonesia) announced on Friday (07/07) that the nation's foreign exchange assets fell to USD $123.09 billion last month, from USD $124.95 billion in May 2017 (which was an all-time record high level).

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The central bank of Indonesia (Bank Indonesia) expects Indonesia's inflation rate to rise to 4.36 percent year-on-year (y/y) by the end of 2017, a significant jump compared to the 3.02 percent (y/y) inflation rate in 2016 but still within the initial target range of Bank Indonesia (that is set at a wide range of 3 - 5 percent y/y). According to the latest data from Indonesia's Statistics Agency (BPS), Indonesia's annual inflation rate rose to 4.33 percent (y/y) in May, up from 4.17 percent (y/y) in the preceding month.

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The central bank of Indonesia (Bank Indonesia) announced the country's foreign exchange reserves rose by USD $1.7 billion to reach the new record high of USD $124.95 billion at the end of May 2017. Growth of Indonesia's foreign exchange assets was attributed to foreign exchange receipts (mainly originating from tax revenues and government oil & gas export earnings), as well as to Bank Indonesia's foreign exchange bills auction.

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Starting from March 5, 2018, Indonesian citizens as well as foreigners need to be a bit more careful when bringing foreign-denominated cash money into Indonesia. A new Bank Indonesia regulation sets a IDR 1 billion (approx. USD $75,000) ceiling on the total amount of foreign cash money an individual can bring into Indonesia.

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Sugeng, Deputy Governor of Indonesia's central bank (Bank Indonesia),  confirmed on Monday morning (08/05) that his institution has recently been intervening in the foreign exchange market in an effort to limit sharp rupiah appreciation. So far in 2017 the Indonesian rupiah has appreciated 1.11 percent against the US dollar with most of the rupiah's advance stemming from the first month of the year.

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Following the announcement last year, the central bank of Indonesia (Bank Indonesia) has again stated that it is to ease the minimum statutory reserves (in Indonesian: giro wajib minimum) regulations for conventional local banks (both for rupiah and foreign-denominated currencies). With this looser approach, banks can manage their liquidity more effectively, which should lead to reduced volatility on the overnight money market ("interest rate buffer").

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The central bank of Indonesia (Bank Indonesia) said the nation's foreign exchange reserves rose to USD $121.8 billion in late March 2017 from USD $119.9 billion in the preceding month. The increase was primarily attributed to proceeds from tax collection, state revenue from the oil & gas sector, the issuance of global bonds and the auction of Bank Indonesia foreign exchange bills.

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Non-bank corporations in Indonesia that hold external (foreign-denominated) debt will be forced to hedge their foreign exchange holdings against the Indonesian rupiah with a ratio of 20 percent in the period 1 January 2015 to 31 December 2015 in an effort to limit risks stemming from increased private sector external debt. At end-August 2014, privately-held foreign debt stood at USD $156.2 billion (53.8 percent of the country’s total external debt), increasing three-fold from end-2005 and thus jeopardizing macroeconomic stability.

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The wide current account deficit of Indonesia is expected to have eased in the third quarter of 2014. According to information from the country’s central bank, the current account deficit narrowed to 3.1 percent of gross domestic product (GDP) in Q3-2014 from 4.27 percent of GDP in the previous quarter. A deficit below the level of 3 percent of GDP is generally regarded as a sustainable level. The improvement in Q3-2014 is mainly due to resumed mineral exports after the government and several miners managed to finalize renegotiations.

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Bank Indonesia decided to hold the key interest rate (BI rate) at 7.50 percent in October, with the Lending Facility and Deposit Facility rates kept at 7.50 percent and 5.75 percent, respectively. This level is expected to help control inflation at 4.5±1 percent in 2014 and 4.0±1 percent in 2015, as well as to reduce the current account deficit to a more sustainable level. Despite stable domestic conditions, Bank Indonesia sees risks: contagion risk stemming from US monetary tightening and possible higher subsidized fuel prices.

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Bank Indonesia Governor Agus Martowardojo said that although the recent weakening trend of the Indonesian rupiah exchange rate is in line with the performance of other Asian currencies, the central bank is prepared to intervene in the market in an effort to support the currency and keep it in a comfortable range. On Monday (06/10), Bank Indonesia Executive Director Tirta Segara already stated that foreign exchange intervention was conducted in September 2014 in order to stabilize the rupiah exchange rate.

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The central bank of Indonesia (Bank Indonesia) released a press statement on Wednesday evening (01/10) in which it set out its view on the country’s trade balance and inflation after the latest economic data had been released by Statistics Indonesia (abbreviated BPS) earlier on the day. Based on information of BPS, Indonesia’s September inflation was relatively low at 0.27 percent month-to-month (m/m), while the August trade balance swung back into a deficit at USD $318.1 million.

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The central bank of Indonesia (Bank Indonesia) will not lower its key interest rate (BI rate) until accelerated inflation (brought on by the looming subsidized fuel price hike at the end of the year) has eased and US interest rates are stable (the US Federal Reserve may raise its key interest rate in the second or third quarter of 2015). This implies that the relatively high interest rate environment in Indonesia (the key BI rate has been at 7.50 percent for almost a year) will continue (to safeguard financial stability) at the expense of higher economic growth.

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The central bank of Indonesia (Bank Indonesia) expects that the country’s current account deficit will only ease slightly in 2014. Last year, the deficit reached 3.3 percent of Indonesia’s gross domestic product (GDP), a level which is generally considered unsustainable and leads to reduced investor confidence. Countries that have to cope with a wide current account deficit, such as Indonesia and India, are highly vulnerable in times of global shocks as investors will quickly withdraw their investments from assets in these countries.

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The Indonesian rupiah exchange rate depreciated 0.54 percent to IDR 11,822 per US dollar in the past week (based on the Bloomberg Dollar Index). Several internal and external factors influenced the currency’s performance over the past week, such as increased US dollar demand from local Indonesian companies, Bank Indonesia’s decision to leave the BI rate unchanged and the improving US economy. Lastly, the structural current account deficit (triggered by expensive oil imports) remains a problem for investors.

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The central bank of Indonesia (Bank Indonesia) kept its key interest rate (BI rate) at 7.50 percent for the tenth consecutive month as inflation is under control and well within the year-end target of the central bank (3.5-5.5 percent). The lending facility and deposit facility were kept at 7.50 percent and 5.75 percent, respectively, at Thursday’s Board of Governor’s Meeting (11/09). The central bank also expects that the current interest rate environment is capable of curbing the country’s wide current account deficit.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) declined 0.92 percent to 5,136.86 points on the last trading day of the week. Seven of the ten sectorial indices fell, led by the finance sector (-1.66 percent), followed by consumer goods (-1.50 percent) and manufacturing (-1.34 percent). The main reason for this poor performance is that investors are again looking at the true fundamentals of the Indonesian economy instead of optimism about Joko Widodo becoming Indonesia’s seventh president.

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