TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
BI shifts to dovish monetary policy in 2019 to stoke growth
The central bank lowered its policy rate, the seven-day reverse repo rate, four times this year to bring down the rate from 6 to 5 percent
Change Size
Finance Minister Sri Mulyani (second left) talks with the Financial Services Authority’s board of commissioners chairman Wimboh Santoso (left), Bank Indonesia Governor Perry Warjiyo (second right) and the then- Deposit Insurance Corporation commissioner Destry Damayanti (now one of BI's deputy governors) after addressing the media on economic conditions in Jakarta on July 30.
(Antara/Galih Pradipta )
B
ank Indonesia (BI) eased its policy gears in 2019 to fuel domestic growth amid a more stable rupiah, benign inflation and the United States Federal Reserve’s dovish monetary policy, which have provided breathing space for the central bank to cut its benchmark interest rate.
The central bank lowered its policy rate, the seven-day reverse repo rate, four times this year to bring down the rate from 6 to 5 percent, citing the need to boost domestic growth amid a stable external sector.
Inflation was recorded at 3 percent year-on-year (yoy) in November, well within BI’s target range of 2.5 to 4.5 percent.
GDP, meanwhile, cooled to 5.02 percent in the third quarter, the slowest growth rate in more than two years but household spending remained stable despite a slump in investment.
The rate cut this year partially unwound the 175 basis points (bps) tightening in 2018 to assert stability for the rupiah, which was under pressure as investors left emerging markets to seek higher returns in developed markets amid a rise in interest rates initiated by the Fed last year.
The Fed, meanwhile, reversed its monetary policy stance this year as it cut rates for the first time in over a decade on July, with the ongoing trade war between the US and China as well as muted inflation cited as factors favoring the rate cut.
In total, the Federal Open Market Committee – the Fed’s interest rate-setting body – slashed its policy rate three times this year to bring it to 1.5 to 1.75 percent, while it also hinted that the rates would remain steady in 2020.
