As expecting, board governors of Bank Indonesia maintained its seven days repo rate at 4 percent, amid the dynamics of adjusting global capital flows - Photo by BI Office

JAKARTA (TheInsiderStories) – As expecting, board governors of Bank Indonesia (BI) maintained its seven days repo rate at 4 percent, amid the dynamics of adjusting global capital flows, the governor, Perry Warjiyo, told reporters today. The decision also taken to keep the Rupiah stable, he adds.

In this year, the local currency has fallen 5.4 percent. Last month, the exchange rate was recorded have weakened 2.13 percent due to high financial market uncertainty. Early October, the Rupiah strengthened again by 1.22 percent compared to September’ levels, driven by the return of foreign capital inflows to the domestic financial market.

With this development, up to Oct. 12, the currency has depreciated around 5.56 percent compared to end of 2019. Going forward, said Warjiyo, the Bank continues to strengthen the domestic currency through an effective monetary operations and availability of liquidity in the market.

Talking on the burden sharing, he explained, the central bank has cut reserve requirements, loosened lending rules and made direct purchases of government bonds to fund the government’ COVID-19 relief programs. So far, BI had injected Rp667.6 trillion rupiah (US$45.41 billion) of fresh liquidity into financial markets.

On the current account, he predicted the country will posts a surplus in the third quarter (Q3) of 2020 due to improvement in export values and adjustments in imports amid the subdued domestic demand. This forecast is driven by the potential for a large trade surplus in the 3Q compared to the surplus in the previous quarter.

During July – August, the trade balance recorded a surplus of $5.57 billion. Overall, he said, the balance of payments is predicted to experience a surplus in the same quarter, despite the net outflows of $1.24 billion in foreign portfolio investment.

At the beginning of October, foreign capital inflows gradually improved. As of Oct. 9, a net inflows recorded of $330 million. While, at the end of September, the position of foreign exchange reserves stood at US$135.2 billion, equivalent to financing 9.5 months of imports or 9.1 months of imports and servicing of government external debt, and is above the international adequacy standard of around 3 months of imports.

Warjiyo believed, by the end of this year, current account deficit remain low, below 1.5 percent of gross domestic product, supporting by the resilience of the external sector. The inflation rate also remains low in line with the weak of demand and adequate supply.

In September, he continued, the Consumer Price Index (CPI) recorded a deflation of 0.05 percent on month to month basis and year to date was recorded at 0.89 percent. Annually, the inflation was recorded at 1.42 percent, although it was higher than the August inflation of 1.32 percent.

In addition, adds by the governor, BI has increased liquidity in the banking sector by around Rp667.6 trillion, due to a decrease in the statutory reserve requirement of around Rp155 trillion and monetary expansion about Rp496.8 trillion. He said, liquidity easing and rate reduction policies led to a reduction in deposit and credit rates in September, from 5.49 percent and 9.92 percent in August to 5.18 percent and 9.88 percent, respectively.

US$1: Rp14,700

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