Sign up | Log in



Home  >>   Daily News  >>  Indonesia  >>Economy>>BI defends dovish stance despite dilemma
NEW UPDATES Asean Affairs  28 October  2015  

BI defends dovish stance despite dilemma

Bank Indonesia (BI) has defended its dovish stance, despite facing the dilemma of whether to cut its rate to spur growth or keep it to maintain stability.

After holding its monthly board of governors meeting on Oct. 15, BI maintained its benchmark policy rate at 7.5 percent, unchanged since February.

It hinted that a rate cut was possible, saying in an official statement that “in the future, there is room for monetary policy easing”, attributing the possible move to pressures on the macroeconomic stability that had begun to subside.

BI Governor Agus Martowardojo insisted late on Thursday that its dovish stance was backed by new data that had shown significant economic improvement with regard to inflation, current account and trade balance.

“If [economic progress] can be maintained, inflation may reach 3.6 percent this year,” he said, adding that the central bank expected to see economic growth rebound in the second half as well, higher than 4.7 percent and 4.67 percent in the first and second quarters, respectively.

“We are also seeing similar improvement in the current account. We predict CAD [current-account deficit] to hover at 1.95 percent of the GDP [gross domestic product] in the third quarter and remain at 2 percent or 2.1 percent for the full year. That is surely better than the 3 percent deficit we recorded in 2014.”

However, despite BI’s conviction, the rupiah tumbled following the rate announcement, depreciating 0.9 percent to 13,540 per US dollar the next day as the statement was mostly perceived as negative.

The currency depreciation mirrored what happened in February, when BI surprisingly cut its key rate by 25 basis points to 7.5 percent from 7.75 percent, resulting in the rupiah dropping 0.8 percent per dollar the following day.

Meanwhile, since the latest BI rate announcement, the rupiah rebounded 0.4 percent to close at 13,484 against the greenback on Friday.

Agus acknowledged that further development might result in a new set of economic data that could steer the central bank from its dovish stance. “Everything will be data dependent. We will only carry out changes in our policy if we are supported by data.”

He cited the lingering uncertainty over the next interest rate hike by the US Federal Reserve and China’s slowing economy as major factors to watch out for.

Experts contacted by The Jakarta Post agreed that the central bank was facing a dilemma.

OCBC Bank economist Wellian Wiranto said that a tough trade-off was taking place. “In an ideal world, there would certainty that the Fed would not hike its rate anytime soon and thus, leaving BI with room to cut rates,” he said.

“Obviously, the world is less than ideal and the possibility that the Fed may surprise the market and hike the rate is still there, even if lower than before.”

ANZ Indonesia’s head of markets Sonny Samuel said that a rate cut was possible as long as there was good balance and confidence on fiscal and monetary improvements against the threat of global uncertainty triggered by a potential US interest-rate hike.

“Question is, how aggressive will the US rate hike will be?” he wrote in an email.

Meanwhile, according to Barclays economist Wai Ho Leong and DBS Indonesia treasury head Wiwig Santoso, a rate cut by BI at this time would be premature, considering that the Fed had not increased its own key rate.

The use of the rate cut option is not without risks, since a cut at the wrong time might weaken the rupiah again should the Fed not jack up its rate, Leong said in an email.

Reach Southeast Asia!
10- Nations, 560- Million Consumers
And $1 -Trillion Market
We are the Voice of Southeast Asia Media Kit
The only Media Dedicated to Southeast Asia Advertising Rates for Magazine
Online Ad Rates

Comment on this Article. Send them to

Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below

Today's  Stories                           October 28 , 2015 Subsribe Now !
• Dong Nai attracts $2 billion in investment Subcribe: Asean Affairs Global Magazine
• BI defends dovish stance despite dilemma
• ‘AEC may not meet December deadline for integration’
Research Reports
on Thailand 2007-2008

• Textiles and Garments Industry
• Coffee industry
• Leather and footwear industry
• Shrimp industry

• Brunei’s foreign direct investments drop by 25.9 per cent in 2014 
Garuda chalks up profits in Q3 despite haze woes
Asean Analysis                   October 22, 2015
• Asean Analysis October 22, 2015
Climate justice advocates call for fair shares,fair deal and fair process
Advertise Your Brand

Asean Stock Watch  October 26,   2015
• Asean Stock Watch-October 26, 2015
The Biweekly Update
• The Biweekly Update October 16, 2015

ASEAN NEWS UPDATES      Updated: 04 January 2011

 • Women Shariah scholars see gender gap closing
• Bank Indonesia may hold key rate as inflation hits 7 percent
• Bursa Malaysia to revamp business rules
• Private property prices hit new high in Singapore • Bangkok moves on mass transport
• Thai retailers are upbeat
• Rice exports likely to decline • Vietnamese PM projects 10-year socioeconomic plan


This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More






1.  Verifier

1. Verifier

For security purposes, we ask that you enter the security code that is shown in the graphic. Please enter the code exactly as it is shown in the graphic.
Your Code
Enter Code

Home | About Us | Contact Us | Special Feature | Features | News | Magazine | Events | TV | Press Release | Advertise With us

| Terms of Use | Site Map | Privacy Policy  | DISCLAIMER |

Version 5.0
Copyright © 2006-2017 TIME INTERNATIONAL MANAGEMENT ENTERPRISES CO., LTD. All rights reserved.
Bangkok, Thailand