JAKARTA (TheInsiderStories) – Bank Indonesia (BI) make a fourth straight cut during this year, after decided cut the BI 7-Days Reverse Repo rate (BI-7DRR) by 25 bps to 5 percent, today (10/24). The central bank also cut the Deposit and Lending Facility by 25 bps to 4.25 percent and 5.75 percent, respectively.
In the press briefing at his office, BI’ Governor Perry Warjiyo, said the policy is consistent with inflation estimation and return on the domestic financial investment.
He explained, this policy was also make by paying attention to external and internal situations. Externally, said the governor, world economic growth has been slower, although financial market uncertainty has eased slightly after the United States (US) – China trade agreement in October 2019. The weakening of global economic growth is influenced by decline in trade volume due to tensions between US and China.
He noted, the US economy is also slowing down due to the declining confidence of economic actors. Similar thing also occurred in Europe, Japan, China and India. This condition, he adds, had an impact on the decline in global oil and commodity prices, which subsequently led to weak inflationary pressures.
“Various countries responded to this situation by loosening monetary policy and providing fiscal stimulus,” Warjiyo said.
Meanwhile, from the domestic side, export growth slightly improved amid global demand and declining global commodity prices. The improvement was influenced by manufactured export products such as motor vehicle exports to ASEAN countries and gold exports which grew positively.
In the next round, the policy mix pursued by BI and the government is expected to maintain the Indonesian economic growth. In 2019, economic is targeted to grow in the range of 5.0 – 5.4 percent and 5.1 – 5.5 percent in 2020.
Meanwhile, the current account deficit is predicted to remain under control. Going forward, the current account deficit in 2019 and 2020 is forecasted to be in the range of 2.5-3 percent of GDP, and will be supported by large inflows of foreign capital.
Then, Rupiah exchange rate in Oct 2019 recorded an appreciation of 1.18 percent point-to-point compared to the level at the end of September 2019. Since the beginning of the year to Oct 23, 2019, rupiah has recorded a gain of 2.50 percent (YTD).
While, the strengthening of Rupiah, according to him, was supported by foreign capital inflows and the operation of foreign exchange demand and supply mechanism. Going forward, Bank Indonesia views the Rupiah exchange rate to remain stable in accordance with its fundamentals and maintained market mechanism.
While, inflation remains under control at a low and stable level. In annual terms, inflation in September 2019 was recorded at 3.39 percent in annual basis, lower than the inflation in August 2019 at 3.49 percent.
He concluded, BI will maintain price stability and strengthen policy coordination with the government. In 2019, inflation is predicted to be below the midpoint of the target range of 3.5 ± 1 percent and maintained within the target range of 3±1 percent by 2020.
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