Indonesia skyline

Indonesia Monetary Policy August 2021

Indonesia: Central Bank keeps monetary policy unchanged in August

At its monetary policy meeting held on 18–19 August, 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 to hold rates was underpinned by its commitment to help the ongoing recovery amid still-elevated daily Covid-19 infections, which led the government to extend restrictions in early August and could weigh on activity in the third quarter. Meanwhile, price pressures remain contained, with inflation having eased in June–July from May’s mild uptick, providing the space to maintain an accommodative stance. That said, the Bank expects the headline reading to return to and remain within the 2.0%–4.0% target range going forward.

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 efforts to improve the national economy”. The vast majority of FocusEconomics panelists see the seven-day reserve repo rate ending 2021 at 3.50%.

Regarding the outlook, economists at Goldman Sachs commented:

“Going forward, given weak growth fundamentals amid renewed activity declines on tighter movement restrictions and subdued inflation pressures, we expect Bank Indonesia to keep the policy rate on hold this year, while keeping liquidity conditions benign and supporting the economy using other tools including quantitative easing, macro-prudential policy easing and targeted efforts to encourage credit growth to businesses in priority sectors.”

The next meeting is scheduled for 19–21 September.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest