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Indonesia Monetary Policy December 2019

Indonesia: Bank Indonesia stays put in December

At its 18-19 December monetary policy meeting, Bank Indonesia (BI) left the seven-day reverse repo rate unchanged at 5.00%, as had been expected by market analysts. The Bank also left the deposit facility and lending facility rates stable at 4.25% and 5.75% respectively.

The decision to stay put came after several rounds of easing since June aimed at warding off an economic slowdown. With key central banks such as the Federal Reserve leaving rates unchanged in December, global tensions easing after progress on U.S.-China trade talks, and rising domestic consumer confidence, BI felt that further easing was not justified.

In its communiqué, the Bank reiterated that it would continue to opt for an “accommodative policy mix” in order to support the economy. This suggests further rate cuts and/or macroprudential measures such as reductions in reserve requirements are possible going forward. Most FocusEconomics panelists see some further loosening before end-2020.

According to Nicholas Mapa, senior economist at ING: “We expect the central bank to resume its rate cut cycle next year given President Jokowi’s directive for faster growth via investments but we believe that policy easing would be timed during periods of IDR stability and when economic data such as export growth are positive”.

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