Bank Indonesia governor Agus Martowardojo (Antara)

Bank Indonesia (BI) says it will not ease its monetary policy even though the US Federal Reserve (Fed) decided on Wednesday (local time) to keep its fund rate near zero.

BI governor Agus Martowardojo stated that although a series of economic policy packages released by the government had resulted in economic improvements in the third quarter of this year, the central bank was still wary of global economic conditions faced by Indonesia.

"Domestic [economic] conditions are subject to external conditions that require us to keep a loose stance," said Agus, commenting on the possibility of BI cutting its benchmark interest rate (BI rate).

Agus explained that at the BI board of governors meeting (RDG) last month, it was considered that Indonesia's inflation was still under control, at under 4 percent, in line with its target range.

Likewise, he added, the country's trade balance and current accounts were also showing improvements, boosting economic growth in the third quarter, seeing it improve better than it did in the second quarter.

"So, in general, Indonesia'€™s economy has shown improvements and we've seen that the third, fourth and fifth economic policy packages have met with a positive response in the markets," he added.

However, Agus continued, BI would keep aware of global economic development. Although global economic growth would fall from 3.8 percent this year to 3.6 percent in 2016, the global economy had not shown any particular conditions that would ensure Indonesia's macroeconomic stability and financial system stability.

"The development of the global economy is still not showing improvements," Agus said.

With its interest rate still close to zero, the Fed said it was still monitoring global economic and financial developments. The US central bank reported noting a slowdown in job creation, and inflation remaining weak. However, the Fed continues to believe that the US labor market is improving and that inflation will rise towards the target of 2 percent in the medium term.

The statement increases the likelihood that the Federal Open Market Committee (FOMC) will start a series of interest rate hikes in early December. (ebf)

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