Indonesia Monetary Policy April 2017

Indonesia

Indonesia: Bank Indonesia stays put

April 21, 2017

At its 18 and 20 April monetary policy meeting, Bank Indonesia decided to hold the BI seven-day Reverse Repo rate at 4.75%. The decision was widely expected by market analysts after the Bank had made several rate cuts in 2016. In addition, the Bank decided to hold the lending facility rate and the deposit facility rate at 5.50% and 4.00%, respectively.

Bank Indonesia’s unchanged stance is due to the moderate growth and inflation outlook for the economy. A lackluster yet healthy outlook for the domestic economy should keep domestic prices pressures in check, despite upcoming adjustments to administered prices. Meanwhile, the backdrop of a tightening Federal Reserve has reduced space for easing.

The Bank provided little forward guidance, stating that it will monitor adjustments in prices and other domestic events closely. 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 for 4.78% at the end of the year. For 2018, panelists expect the BI rate to end the year at 4.94%.


Author: Angela Bouzanis, Senior Economist

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Indonesia Monetary Policy Chart


Indonesia Monetary Policy April 2017

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


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