Asia
ECONOMY | Staff Reporter, Indonesia
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Indonesia maintains policy stance at 4.75%

It also trimmed GDP forecast to 5-5.4% amidst global uncertainty.

Bank Indonesia (BI) decided to keep the policy rate on hold at recent board meeting in response to uncertainties from the surprise US election result.

The 7-day reverse repo rate was kept unchanged at 4.75%, and the deposit and lending facility rates were maintained at 4.0% and 5.5%, respectively.

Standard Chartered (SC) notes that the move was widely anticipated by the market.

The BI statement suggested cautiousness, despite a relatively positive assessment of domestic economic stability.

BI sees inflation at 3.0-3.2% y/y in December, close to the bottom end of its target, and a manageable current account (C/A) deficit.

It expected GDP growth to remain muted in Q4-2016 due to fiscal consolidation, but slightly lowered its 2017 GDP growth outlook to 5.0-5.4% y/y (from 5.1-5.5%) on weaker-than-expected global economic growth.

No clear policy guidance was stated in the press release, but BI said that its current easing monetary policy remained adequate to support a domestic demand recovery.

SC expects BI to maintain its cautious tone early next year, as market volatility is likely to stay high due to the US government transition and rate normalisation process, and political events in Europe.

"An increase in domestic inflation and a steepening US curve may, thereafter, complicate the loosening bias policy, in our view. We expect BI to keep rates on hold in 2017 and focus on smoothening IDR volatility and maintaining the currency in line with its basket of currencies for the time being," it said.
 

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