Indonesia Holds Rates Steady in February

At its February 13th, 2014 meeting, Bank Indonesia left its benchmark interest rate unchanged at 7.5 percent, as widely expected, as the country’s current account deficit had narrowed sharply in the last quarter of 2013. The lending and deposit facility rates were also left unchanged at 7.50 percent and 5.75 percent, respectively.

Excerpt from the statement by the Board of Governors of Bank Indonesia:

Domestic economic growth in Indonesia exceeded Bank Indonesia projections during the fourth quarter of 2013, underpinned by a more balanced structure. In 2014, moderate domestic demand is expected to persist but exports are expected to perform more favorably in line with the global economic recovery and improvements are expected in the economic structure of Indonesia, therefore, growth in 2014 is projected to hit the lower end of the 5.8-6.2% range. 

Stronger exports significantly helped reduce the current account deficit and bolster efforts to improve the balance of payments in quarter IV 2013. The current account deficit decreased sharply during the final quarter of 2013, amounting to just 1.98% of GDP and well below the 3.85% of GDP reported in the previous period.

Sounder economic fundamentals in Indonesia helped assuage depreciatory pressures plaguing rupiah exchange rates. Such conditions are closely linked to measures undertaken by Bank Indonesia to deepen financial markets, including hedging swaps and interbank repos using mini MRA. Looking forward, Bank Indonesia will consistently maintain rupiah exchange rate stability in line with its fundamental value and supported by a variety of endeavors to deepen the foreign exchange market. Bank Indonesia will also continue promoting the rupiah for domestic transactions pursuant to the Currency Act and advocate broader hedging instruments for foreign exchange transactions.

Indonesia Holds Rates Steady in February

Bank Indonesia | Joana Taborda |
2/13/2014 9:50:27 AM