Indonesia Leaves Monetary Policy Unchanged

Bank Indonesia left its benchmark interest rate on hold at 7.5 percent on November 13th, as inflation continues to ease and current account deficit narrowed in the third quarter of 2014. The lending facility rate and the deposit facility rate also remained unchanged at 7.5 percent and 5.75 percent respectively.

Excerpts from the statement by the Bank Indonesia:

The position of the Indonesia Balance of payments strengthened in the third quarter of 2014, buoyed primarily by a declining current account deficit. The current account deficit amounted to US$6.836 billion in the reporting quarter (3.07% of GDP), down from US$8.689 billion in the second quarter (4.07% of GDP) as well as from US$ 8.635 billion in the third quarter of 2013 (3.89% of GDP). Gains in the current account were primarily supported by a significant surplus in non-oil and gas trade balance, in line with the adoption of economic stabilization policy amidst the increased deficit in oil and gas balance. The improvements were further nurtured by positive manufacturing export performance stemming from the US recovery licenses were granted to recommence unrefined mineral exports. Looking ahead, the current account deficit is projected to continue improving in line with robust manufacturing and mineral exports as well as controlled oil and gas imports.

The rupiah depreciated slightly due to global sentiment. Pressures on the rupiah were influenced by external factors, namely concerns over the normalization of the Federal Reserve policy, global geopolitical dynamics and the global economic downturn. Internally, however, rupiah depreciation was triggered by the wait-and-see attitude of investors towards the formation of the new government cabinet and work programs. Pressures on the rupiah persisted into October. 

Inflation was controlled and continued to follow a downward trend, thereby bolstering the prospect of achieving the 2014 inflation target of 4.5±1%. 

Indonesia Leaves Monetary Policy Unchanged

Bank Indonesia | Joana Taborda |
11/13/2014 10:25:20 PM