Indonesia Holds Interest Rate at 4.25%


The central bank of Indonesia left its benchmark repo rate unchanged at 4.25 percent for the sixth straight meeting on March 22nd 2018, in line with market expectations. Policymakers said the current policy stance is sufficient to maintain macroeconomic and financial stability and support the domestic economic recovery.

The lending and the deposit facility rates were also left steady at 5 percent and 3.5 percent respectively.

Excerpts from the Bank Indonesia Press Release:

The policy is consistent with efforts to maintain macroeconomic and financial system stability while supporting the domestic economic recovery. Bank Indonesia considers the previous steps taken to ease monetary policy adequate in terms of building domestic economic recovery momentum. Moving forward, Bank Indonesia believes that maintained economic stability will be the backbone of stronger and more sustainable economic growth. Furthermore, Bank Indonesia will continue to monitor the risks, including external risks such as growing uncertainty in the global financial markets and tendency to implement inward-oriented trade policy, which could lower world trade volume and economic growth. Bank Indonesia correctly predicted the higher-than-expected FFR hike on 21st March 2018, and anticipates that the US monetary policy normalisation will continue - with another FFR hike - coupled with rising commodity prices, including oil. Thus, Bank Indonesia will constantly optimise its mix of monetary, macroprudential and payment system policies to strike an optimal balance between macroeconomic and financial system stability and the current economic recovery. In addition, Bank Indonesia also strengthens policy coordination with the Government to maintain macroeconomic and financial system stability, while enhancing structural reforms.

In 2018, Bank Indonesia projects the domestic economy to expand in the 5.1-5.5% (yoy) range, buoyed by increasing government consumption and investment in ongoing infrastructure projects, stable private expenditure and stronger exports, due to growing external demand. 

Bank Indonesia projects the current account deficit in 2018 to remain under control and within a safe threshold at 2.0-2.5% of GDP in line with domestic economic improvements.

Also, inflation is expected to remain within the target range of 3.5 ± 1 percent in 2018.

Indonesia Holds Interest Rate at 4.25%


Bank Indonesia | Gabriela Costa | gabriela.costa@tradingeconomics.com
3/22/2018 2:18:03 PM