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Today's Headlines Monetary Policy

  • UBS Investment Bank: Indonesia's GDP Growth at 4.8% in 2017

    UBS Investment Bank is less positive about Indonesia's economic growth in 2017 compared to most other institutions. The global financial services company, with its headquarters in Switzerland, expects to see the Indonesian economy growing by 4.8 percent year-on-year (y/y) in 2017. Edward Teather, Senior Economist for ASEAN and India at UBS, says the year 2017 is a year of adjustment and balancing for Southeast Asia's largest economy, while the role of fiscal support toward GDP growth is also seen declining this year. He added that 2018 will be the year in which Indonesia should see strongly accelerating economic growth.

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  • Economy of Indonesia: Financial Sector is Stable, Says KSSK

    The Financial System Stability Committee (in Indonesian: Komite Stabilitas Keuangan, or KSSK) stated that Indonesia's economy is stable. The KSSK further informed that it will raise efforts to enhance market confidence in Indonesia's financial sector. The KSSK, an Indonesian institution that is responsible for preventing financial crises, consists of a selection of key policymakers from the Finance Ministry, Bank Indonesia, Financial Services Authority (OJK) and Deposit Insurance Corporation (LPS).

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  • Bank Indonesia: Room for Monetary Easing in Indonesia

    Agus Martowardojo, Governor of Indonesia's central bank (Bank Indonesia), says there remains room for monetary easing in Southeast Asia's largest economy in the last few months of 2016, provided that both the domestic and global context remain conducive. However, Martowardojo did not specify what this monetary easing exactly entails: a lower key interest rate, cutting the primary minimum statutory reserves (in Indonesian: giro wajib minimum primer), or macro-prudential policy easing? Whatever the move may be, it will for sure be data-dependent, Martowardojo emphasized.

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  • Bank Indonesia Cuts Key Interest Rate (BI Rate) to 6.50% in June

    The central bank of Indonesia (Bank Indonesia) cut its key interest rate (BI rate) by 0.25 percentage point to 6.50 percent at Thursday's policy meeting (16/06). Although the central bank had stated at its preceding policy meeting that there remained room for monetary easing, today's move was a surprise that few analysts saw coming. The 7-day reverse repurchase rate, which is set to become the central bank's new benchmark rate on 19 August, was also cut by 25 basis points (to 5.25 percent) at today's policy meeting.

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  • Indonesia's Ranking in A Selection of International Indexes

    How does Indonesia rank internationally in terms of happiness, human development, global innovation, and global competitiveness? Below we present a number of global rankings. Generally, Indonesia is ranked among the lower-medium segment, implying the nation has a long way to go before becoming an advanced economy.

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  • Credit Ratings Indonesia: Standard & Poor's, Fitch Ratings & Moody's

    Slowly but surely Indonesia is obtaining the investment grade rating from the world's three key credit rating agencies. Fitch Ratings already reinstated Indonesia's investment grade rating in 2011, a step that was followed by Moody's Investors Service in 2012. Although Standard & Poor's (S&P) has been more careful, there emerged speculation that S&P will assign the investment grade status to Indonesia soon (perhaps in June 2016). Last week, a S&P team visited Indonesia - to study the country's latest policy reforms and developments - and signaled that its assessment is positive.

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  • Bank Indonesia Keeps Key BI Rate at 6.75% in April Policy Meeting

    The central bank of Indonesia (Bank Indonesia) kept its key interest rate (BI rate) at 6.75 percent at the April policy meeting. This decision was in line with expectations. During the three policy meetings conducted in the January-March 2016 period Bank Indonesia had already cut its BI rate by a combined 75 basis points as inflation and the current account deficit are under control, while the Indonesian rupiah has been strengthening against the US dollar since the start of 2016. Last week, Bank Indonesia announced it will adopt the seven-day reverse repurchase rate (reverse repo) to replace the existing BI rate as the bank's key monetary tool.

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  • Bank Indonesia to Adopt 7-Day Reverse Repurchase Rate as Key Monetary Tool

    The central bank of Indonesia (Bank Indonesia) plans to adopt a new tool of monetary policy that is to replace the existing benchmark interest rate (BI rate). On Friday (15/04), Bank Indonesia will announce and elaborate on the new policy. Earlier, Indonesia's central bank said it was studying the implementation of a seven-day reverse repurchase rate (reverse repo) as the nation's new benchmark that is to influence borrowing costs and market liquidity more effectively. The new policy would mean Bank Indonesia sells securities with an agreement to buy them back within a seven-day period.

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  • Bank Indonesia's Rate Cut Boosts Optimism for Economic Growth

    In the first three monthly policy meetings this year (January-March) the central bank of Indonesia (Bank Indonesia) cut borrowing costs by a total of 75 basis points. Indonesia's benchmark interest rate (BI rate) was cut from 7.50 percent at the year-start to 6.75 percent at Thursday's Board of Governors' meeting. The overnight deposit facility rate and lending facility rate were also cut by 75 basis points, each, in the first three months. The lower interest rate environment in Indonesia signals that the financial fundamentals are strong. This is partly reason behind strong inflows of foreign capital into Southeast Asia's largest economy.

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  • Lower Net Interest Margin; Indonesian Banks' Shares Plunge

    Shares of Indonesian banks were hit hard on Friday (19/02) after Indonesia's Financial Services Authority (OJK) announced its plan to push state-owned banks net interest margin (NIM) to the range of 3 to 4 percent in a bid to lower the country's lending rates, hence boosting credit growth. NIM is the difference between interest income generated by banks and the amount of interest paid out to the lenders. A higher NIM implies that banks are more profitable. Currently, the average NIM for Indonesia's state-owned banks is between 7 - 8 percent.

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