Indonesia: Central Bank holds its ground in December
At its 15–16 December monetary policy meeting, Bank Indonesia (BI) decided to leave the seven-day reverse repo rate at the all-time low of 3.50%, where it has been since February. The move was widely expected by market analysts.
The Bank’s decision was motivated by its commitment to sustain the ongoing recovery and the local currency, amid contained price pressures and well-anchored inflation expectations. Inflation stood at 1.7% in November, while the recovery should gather momentum in ahead as restrictions are lifted. BI sees GDP growth within the 4.7%–5.5% range next year and expects headline inflation to stay below the midpoint of the 2.0%–4.0% target range for the rest of this year, before moving within that band in 2022.
Looking ahead, BI maintained its dovish tone in its communiqué, pledging to stick to a supportive monetary stance and reiterating its commitment to “maintaining macroeconomic and financial system stability, while supporting national economic recovery efforts”. The majority of our panelists expect the Bank to tighten its stance slightly in 2022.