Jakarta: Bank Indonesia (BI) decided to hold the BI 7-Day Reverse Repo Rate at 6.00 percent after a Board of Governors meeting on Thursday, May 16, 2019.
"While also maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 5.25 percent and 6.75 percent," BI Governor Perry Warjiyo told a press conference this afternoon.
According to the central bank, the decision is consistent with efforts to maintain the external stability of Indonesia’s national economy amidst the re-emergence of global financial market uncertainty.
Moving forward, BI will remain vigilant of global financial market dynamics and external stability with due consideration to the space available for accommodative monetary policy in line with low inflation and the need to stimulate domestic economic growth. BI will also ensure adequate liquidity is available in the banking system, while instituting accommodative macroprudential policy by holding the countercyclical capital buffer (CCyB) at 0 percent, the Macroprudential Liquidity Buffer (MPLB) at 4 percent with flexible repos at 4 percent and the Macroprudential Intermediation Ratio (MIR) in the 84-94 percent range. BI will also strengthen coordination with the Government and other relevant institutions to preserve economic stability, stimulate domestic demand as well as boost exports, tourism and foreign capital inflows.
"In addition, payment system policy and financial market deepening will be strengthened to catalyse economic growth," he remarked.
The global economic recovery is progressing slower than expected and financial market uncertainty is back on the rise. Economic growth in the United States is expected to moderate on limited fiscal stimuli, retreating economic confidence, slower rising wages and persistent structural labour market issues. Economic gains in Europe are being held back by weak exports, ongoing financial sector issues and the structural challenge of an ageing population. China’s economy is also sluggish despite fiscal stimuli in the form of tax cuts and infrastructure development.
Global economic moderation has fed through to lower economic growth in Indonesia than previously expected. Indonesia’s economy grew 5.07 percent (yoy) in the first quarter of 2019, down from 5.18 percent (yoy) in the previous period yet up compared with the 5.06 percent (yoy) recorded in the first quarter of 2018. Global economic moderation and sliding commodity prices have weighed down export growth in Indonesia, thus leading to slower household consumption and non-building investment. Moreover, the effect of election spending on consumption was not as significant as initially predicted.