Indonesia Monetary Policy July 2017

Indonesia

Indonesia: Bank Indonesia maintains status quo

July 21, 2017

At its 19 and 20 July monetary policy meeting, Bank Indonesia decided to hold the BI seven-day Reverse Repo rate at 4.75%. The decision delivered zero surprises and met market expectations. The Bank also left the lending facility rate and the deposit facility rate unchanged at 5.50% and 4.00%, respectively

The unchanged stance reflects a stable growth picture in the country and moderate inflationary pressures. Recent data suggest that the economy is slowly gaining momentum and although inflation has risen, it remains within the Bank’s target range. Moreover, a stable rupiah and government measures to stabilize food prices should prevent price pressures from rising substantially.

Overall, the Bank’s tone was largely unchanged from the last meeting and offered little forward guidance. The current economic backdrop is largely favorable and it appears unlikely that there will be a change in monetary policy in the near term.

The vast majority of panelists see no change to the BI seven-day Reverse Repo rate in 2017, but some have divergent views and the average forecast is 4.79% for the end of the year. For 2018, panelists expect the BI rate to end the year at 4.96%.


Author: Angela Bouzanis, Senior Economist

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