JAKARTA (TheInsiderStories) – Bank Indonesia (BI) noted that the inflows of foreign capital to the Indonesian market until Feb. 21, 2019 reached Rp 45.9 trillion (US$ 3.27 billion), the Governor Perry Warjiyo said today (02/22).
He explained, the majority of this inflow entered through the government bond of Rp33.9 trillion and the rest went to Rp11.3 trillion in shares and Bank Indonesia certificates of Rp1.1 trillion.
Warjiyo added, this inflow increased, comparing to last year which was Rp 13.9 trillion.
“This shows that both domestic and foreign investor confidence in our economy,” Perry said.
He also mentioned about the deflation which recorded 0.07 percent on the third week of February 2019, so yearly inflation was around 2.58 percent.
This deflation is caused by the declining of some commodity prices, those were chili of 0.07 percent, chicken of 0.06 percent, eggs of 0.05 percent, peppers of 0.02 percent and fuel price of 0.07 percent.
The Indonesia Statistics recorded inflation in January at 0.32 percent. While year on year inflation in January 2019 was 2.82 percent and BI targeted 2019 inflation in the range of 2.5 to 4.5 percent.
Furthermore, he thought the Rupiah is still undervalued and that should be stronger than the current price which was in Rp 14.060 against US dollar. He assumed by the inflow of foreign capital, increasing of economic growth, low inflation, more dovish of the Fed Fund Rate, the swap mechanism and domestic non deliverable forward could strengthen the Rupiah.
The local currency in the fourth quarter of 2018, on a point to point basis, rose by 3.63 percent compared to the final level of the third quarter of 2018, supported by the balance of payments which recorded a surplus. The strengthening of the Rupiah continued in January which reached 2.92 percent and continued to occur in February.
Previously, BI Governor Board decided to maintain a 7 day Reverse Repo Rate (BI 7-DRR) at 6 percent, a Deposit Facility interest rate of 5.25 percent, and a Lending Facility interest rate of 6.75 percent.
Warjiyo said, the decision is consistent with efforts to strengthen external stability, particularly to control the current account deficit (CAD) within a safe limit and maintain the attractiveness of domestic financial assets. The Bank also continues to pursue a monetary operations strategy to increase the availability of liquidity in driving bank financing.
Furthermore, he revealed, the decision was made in regarding to global and domestic conditions. He considered, world economic tends to be slowed, caused by reduced uncertainty in the global financial market. As an example, he said, Untied States (US) economic growth slowed due to the limited fiscal stimulus, structural problems of the workforce, and the decline in business confidence.
The increase in the Federal Reserves Fund Rate (FFR) interest rate is expected to be lower and the reduction in the central bank balance sheet becomes smaller than planned. Global economic and financial developments on the one hand provide challenges in encouraging exports, but on the other hand increase the inflow of foreign capital to developing countries, including Indonesia.
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