Indonesia Investments Report - January 2021 Edition: COVID-19 Crisis to Linger On?
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Today's Headlines 7-Day Reverse Repurchase Rate
For the second consecutive month the central bank of Indonesia (Bank Indonesia) cut its benchmark interest rate (the BI seven-day reverse repo rate). And, again, the rate was cut by 25 basis points (bps). It means that the key rate is now at the level of 4.50 percent.
The central bank of Indonesia (Bank Indonesia) left its benchmark interest rate untouched for the first time in five months. At the two-day policy meeting, which was concluded on Thursday (21 November 2019), Bank Indonesia kept the BI 7-Day Reverse Repo Rate at 5.00 percent, while maintaining the deposit facility and lending facility rates at 4.25 percent and 5.75 percent, respectively.
The central bank of Indonesia (Bank Indonesia) showed that it is willing to lend a helping hand to try and boost Indonesia’s economic growth by cutting its benchmark interest rate again. On 19 September 2019 – the last day of its two-day monthly policy meeting – Bank Indonesia cut its BI 7-day reverse repo rate by 25 basis points (bps) to 5.25 percent, while the deposit facility and lending facility rates were lowered (by 25 bps) to 4.50 percent and 6.00 percent, respectively.
Again, it came as a surprise to us that Indonesia’s central bank (Bank Indonesia) decided to cut its benchmark interest rate (the BI Seven-day Reverse Repo Rate) by 25 basis points (bps) to 5.50 percent at the monetary policy meeting of August that was organized on 21-22 August 2019.
At July's two-day monetary policy meeting (held on 17-18 July 2019), the central bank of Indonesia (Bank Indonesia) surprised us by deciding to cut the benchmark BI 7-day Reverse Repo Rate by 25 basis points (bps) to 5.75 percent. Meanwhile, the deposit facility and lending facility rates were lowered - also by 25 bps - to 5.00 percent and 6.50 percent, respectively.
Although we predicted in our latest research report that Indonesia's central bank (Bank Indonesia) would raise its benchmark interest rate at the two-day monetary policy meeting on 14-15 November 2018, we were still taken by surprise after the decision was announced. After all, the rupiah had appreciated significantly in the days after the launch of our October research report.
The central bank of Indonesia (Bank Indonesia) left its benchmark interest rate (the BI 7-Day Reverse Repo Rate) unchanged at 5.75 percent at the October 2018 policy meeting (22-23 October). Meanwhile, the deposit facility and lending facility rates were kept at 5.00 percent and 6.50 percent, respectively.
The central bank of Indonesia (Bank Indonesia) raised its benchmark interest rate (the seven-day reverse repo rate) by 25 basis points (bps) to 5.75 percent at the two-day policy meeting that was concluded on Thursday (26-27 September 2018). Also the deposit facility and lending facility rates were raised by 25 bps to 5.00 percent and 6.50 percent, respectively.
The central bank of Indonesia raised its benchmark interest rate (the seven-day reverse repo rate) by 25 basis points (bps) to 5.50 percent at the August 2018 policy meeting. The decision was in line with our expectations as heavy pressures have been affecting the rupiah after the collapse of the Turkish lira.
In line with expectations the central bank of Indonesia (Bank Indonesia) kept its benchmark interest rate (the 7-day Reverse Repo Rate) at 5.25 percent at the two-day July policy meeting (concluded on Thursday 19 July 2018). Meanwhile, the deposit facility and lending facility rates were kept at 4.50 percent and 6.00 percent, respectively.
Latest Columns 7-Day Reverse Repurchase Rate
The central bank of Indonesia kept the BI seven-day reverse repo rate (7-day RR Rate) at 5.25 percent after its two-day August policy meeting (18-19 august 2016). At this policy meeting Bank Indonesia adopted the 7-day RR Rate as the nation's new benchmark monetary tool, replacing the BI rate that failed to influence markets significantly: despite the BI Rate having been cut from 7.50 percent to 6.50 percent so far this year, Indonesia's lending rates did not drop accordingly.
This week the central bank of Indonesia (Bank Indonesia) is set to adopt the seven-day reverse repurchase rate (reverse repo) as the nation's new benchmark monetary tool at the August policy meeting (18/19 August), thus replacing the existing BI rate that is considered too weak to have an immediate and significant impact on Indonesia's borrowing costs and market liquidity. Bank Indonesia Governor Agus Martowardojo informed that the central bank has been holding road shows to financial centers across the nation (and abroad) to provide detailed information about the new benchmark.
Contrary to expectations, the central bank of Indonesia (Bank Indonesia) left its monetary policy unchanged at the July policy meeting. The benchmark interest rate (BI rate) was kept at 6.50 percent, while the deposit facility rate and lending facility rate were kept at 4.50 percent and 7.00 percent, respectively. The 7-day reverse repurchase rate, which is set to become the central bank's new benchmark on 19 August 2016 - replacing the BI rate - was left at 5.25 percent.
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).
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.
