Indonesia holds repo rate at 4¼% as board sees ‘economic resilience’

By Wendy Van Sickle

Columbus, Ohio, Jan. 18 – Bank Indonesia said its board of governors decided to hold the BI seven-day reverse repo rate at 4¼% at its meeting held Jan. 17 and Jan. 18.

The board also decided to accelerate the implementation of average minimum reserve requirement ratios as a follow-up to the monetary policy operational framework reform. The changes seek to “enhance the effective transmission of monetary policy,” the board said in a statement.

Bank Indonesia is confident that economic resilience is improving in the country, evinced by low inflation over the past three years, a healthy current account, an influx of non-resident capital flows, a stable rupiah exchange rate, an all-time high position of reserve assets and maintained financial system stability, according to the statement.

Indonesia’s economic growth in the fourth quarter of 2017 is expected to remain stable, with a rise expected in 2018, and the rupiah remained stable in 2017, the board noted.

In December, month to month CPI inflation stood at 0.71% month-to-month and at 3.61% year-over-year.

Inflation over the past three years has consistently been within the target corridor of 4% plus or minus 1%. Low core inflation and weak inflationary pressures on volatile foods along with the managed impact of various tariff hikes in the form of administered prices contributed to controlled inflation in 2017, the board said.

“Bank Indonesia predicts inflation to remain within the target range for 2018, namely 3.5% plus or minus 1%,” the board’s statement reads.

“Nonetheless, Bank Indonesia shall constantly monitor the risk of rising inflation. In addition, Bank Indonesia will strengthen policy coordination with the central and local governments.”

The bank also voted to keep the deposit and lending facility rates at 3½% and 5%, respectively.

© 2015 Prospect News.
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