Indonesia’s Reserve Requirement Lowered 50 Basis Points
November 17, 2015
At the November Board of Governors meeting at Bank Indonesia, officials agreed to ease monetary policy via a reduced via a reduction of the primary reserve requirement in Rupiah from 8.0% 7.50. The BI reference interest rate and the central bank deposit rate were left unchanged at 7.5% and 5.5%, respectively. These had been cut last February by 25 basis points. From June through November 2013, the BI rate had been increased by 175 basis point and a further 25-bp hike was added in November 2014 to ensure the a rising trend in inflation got reversed. CPI inflation is targeted for a range of 3-5% currently. A statement released after this month’s meeting makes several points:
- December 1 will be the effective date for the newly lowered reserve requirement ratio.
- “The macroeconomic stability has continued to improve, making room for monetary policy easing.”
- Decent growth continues: “domestic economic growth was projected at the lower end of the 4.7-5.1% range for 2015 and is expected to increase to 5.2-5.6% in 2016.”
- Officials project Indonesia’s current account deficit this year to equal about 2% of GDP.
- A stable exchange rate is desired. “The Rupiah rebounded after intense depreciatory pressures were felt in the third quarter.”
- “Bank Indonesia confirmed that inflation in 2015 will fall towards the lower end of the 4±1% target, supported by strong policy coordination with the government to control inflation locally and nationally. In addition, low inflation through to October 2015 was also indicative of maintained price stability.”
- “The global recovery remains uneven, while pressures on global financial markets demand vigilance.”
- The next meeting is scheduled for December 17th.
Copyright 2015, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank Indonesia
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