Indonesia Monetary Policy May 2017

Indonesia

Indonesia: Bank Indonesia holds rates steady

May 18, 2017

At its 17 and 18 May monetary policy meeting, Bank Indonesia decided to hold the BI seven-day Reverse Repo rate at 4.75%. The decision was in line with market expectations. In addition, the Bank decided to hold the lending facility rate and the deposit facility rate at 5.50% and 4.00%, respectively.

Bank of Indonesia´s unchanged stance comes amid improved growth led by stronger export performance and increased government spending. A moderate outlook for the domestic economy should keep domestic price pressures in check, despite upcoming adjustments to administered prices as part of domestic energy reforms and risks from rising volatile food prices in the approach to the holy fasting month of Ramadan. Meanwhile, U.S. monetary policy tightening by the Federal Reserve has limited the space for easing.

The Bank provided little forward guidance, stating that it will monitor adjustments in prices and other domestic events closely, also remaining vigilant of global risks. The majority of our panelists see the Bank holding rates steady throughout this year.

While a number of panelists see no change to the BI seven-day Reverse Repo rate in 2017, some have divergent views and the average forecast is unchanged at 4.78% at the end of the year. For 2018, panelists expect the BI rate to end the year at 4.94%.


Author:, Economist

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Indonesia Monetary Policy May 2017

Note: BI seven-day Reverse Repo rate in %.
Source: Bank Indonesia (BI).


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