The central bank of Indonesia (Bank Indonesia) expects further monetary easing in the Eurozone to cause more capital inflows into emerging markets (including Indonesia). The European Central Bank (ECB) surprised financial markets last week by cutting interest rates to zero percent, expand its money printing program (quantitative easing) and reduce a key deposit rate further into negative territory (per 16 March 2016). These moves are done in an effort to revive the economy of the Eurozone and combat deflation.

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There are mixed opinions about the interest rate policy of the central bank of Indonesia (Bank Indonesia). Tomorrow (11/09), at the Board of Governor’s Meeting, the central bank will decide whether or not to change the country’s interest rates. Indonesia’s benchmark interest rate (BI rate) has been held at 7.50 percent for ten consecutive months. This relatively high figure managed to ease high inflation (which emerged after prices of subsidized fuel prices were raised in June 2013). However, it also further slowed economic growth.

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