Indonesia Monetary Policy April 2018


Indonesia: Bank Indonesia holds rates steady in April

April 20, 2018

At its 18 and 19 April monetary policy meeting, Bank Indonesia decided to make no changes to interest rates, holding the BI seven-day Reverse Repo rate at 4.25%. The decision met market analysts’ expectations. Accordingly, the Bank also decided to keep the lending facility rate unchanged at 5.00% and the deposit facility rate stable at 3.50%.

The Bank’s stance reflected a solid economy, in which there is no need for further easing. Growth gained some steam in the final quarter of 2017, and the Bank commented in its accompanying statement that activity likely accelerated in the first quarter of this year. It still sees GDP growing between 5.1% and 5.5% in 2018. Within range and broadly stable inflation, as well as the need to prevent the rupiah from weakening further after March’s depreciation, were also behind the Bank’s decision. In April, the Bank intervened in the currency market after the rupiah weakened in the previous month due to the Fed’s tightening cycle and fears of a trade war between the U.S. and China.

In the Bank´s view the current monetary stance is sufficient to support the domestic economy, suggesting that no further rate cuts are in sight following two rate cuts in 2017. That said, the Bank emphasized that it will continue to monitor risks to the economy and work to guarantee a stable macroeconomic and financial environment.

The next monetary policy meeting is to be held on 16 and 17 May.

Indonesia Interest Rate Forecast

FocusEconomics analysts expect the BI seven-day Reverse Repo rate to end 2018 at 4.40%. In 2019, our panel sees the rate ending the year at 4.61%.

Author: Massimo Bassetti, Senior Economist

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