Indonesia: No change to the monetary conditions by the BI – UOB

Economist at UOB Group Enrico Tanuwidjaja and Yari Mayaseti review the latest monetary policy meeting by the Bank Indonesia (BI).

Key Takeaways

“Bank Indonesia (BI) left its benchmark rate unchanged at record low of 3.50% at its 17 November -18 November 2021 monetary policy meeting (MPC) as the economy continued to recover from the country’s worst COVID-19 wave. The benchmark rate has been at that level since February, and BI has signaled the bank could remain on hold at least until year-end. Consequently, BI maintained the Deposit Facility rate at 2.75%, as well as the Lending Facility rate at 4.25%. BI stated that the decision is consistent with the need to maintain the exchange rate and financial system amid low inflation, projected low inflation and efforts to revive economic growth. Bank Indonesia will hold another monetary policy meeting on 16 December 2021.”

“With the daily Covid-19 cases now more under control, the recovery pace is getting back on track. Besides, the inflation is still below the 2% - 4% of the Central Bank’s target range; BI will have the policy space to remain accommodative to support the economic recovery. We keep our BI rate forecast to stay at current level of 3.50% for the rest of the year, while we also forecast that BI will start to hike its benchmark interest rates in the latter half of 2022.”