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Before we give an update on the monetary policy of Indonesia’s central bank (Bank Indonesia), it is worth mentioning that Bank Indonesia Governor Perry Warjiyo was appointed for another five-year term (2023-2028) as the central bank’s chief.
The central bank of Indonesia (Bank Indonesia) raised its benchmark interest rate (BI 7-day reverse repo rate) by 25 basis points (bps) after concluding its two-day policy meeting on 18-19 January 2023. Indonesia’s benchmark rate now stands at 5.75 percent. It also raised its deposit facility and lending facility rates by 25 bps to 5.00 percent and 6.50 percent, respectively.
As expected, the central bank of Indonesia (henceforth: Bank Indonesia) decided to raise its benchmark interest rate (the 7-Day Reverse Repo Rate) by 25 basis points (bps) to 5.50 percent after concluding its latest (two-day) monetary policy meeting on 21-22 December 2022. Meanwhile, it also decided to raise the deposit facility and lending facility rates by 25 bps to 4.75 percent and 6.25 percent, respectively.
For the first time since early November 2020 – which is around five months ago – the Indonesian rupiah depreciated beyond the IDR 14,500 per US dollar level. It is a threshold that makes Indonesians a bit concerned.
The Indonesian rupiah had a good start of the month in November 2020. Based on Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (Jisdor), the rupiah appreciated 3.4 percent against the US dollar in the first two trading weeks of November 2020.
The Indonesian rupiah rate, which had been under extreme pressure amid the start of the novel coronavirus (COVID-19) crisis in March 2020, rebounded in April 2020 and continued this rebound throughout May 2020 (albeit at a less impressive pace).
While the Indonesian rupiah rate had retreated against the US dollar in November 2019 amid an increase in uncertainty in international markets, the Indonesian currency managed to end the year 2019 on a positive note.
The Indonesian rupiah rate appreciated modestly in September 2019. The currency started the month at the level of IDR 14,237 per US dollar and ended the month at IDR 14,174 per US dollar (data taken from Bank Indonesia’s benchmark Jisdor rate). In other words, the rupiah strengthened 0.44 percent against greenback in the month of September 2019.
The Indonesian rupiah made a stable performance against the US dollar in February 2019. The benchmark JISDOR rate of Bank Indonesia ended the second month of the year at the position of IDR 14,062 per US dollar, appreciating modestly from the level of IDR 14,072 per US dollar at the last trading day of January 2019.
In the month of December 2018 the Indonesian rupiah weakened 0.99 percent from IDR 14,339 per US dollar on the last trading day of November 2018 to IDR 14,481 per US dollar on the last trading day of December 2018 (based on Bank Indonesia’s benchmark JISDOR rate).
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At the latest monthly monetary policy meeting (held on 21-22 June 2023) the central bank of Indonesia (Bank Indonesia) decided to keep its benchmark interest rate (the Seven-Day Reverse Repo Rate) at 5.75 percent. The lender of last resort also kept its deposit facility and lending facility rates at 5.0 percent and 6.5 percent, respectively.
In our previous report we expected to witness a calmer international context as the US Federal Reserve was assumed (by markets and most analysts) to have ended its monetary tightening phase.
Last month, we saw that the Indonesian rupiah started appreciating when the world was focused on the US Federal Reserve’s response to the collapse of three American banks (followed by trouble at Credit Suisse).
There are analysts who believe that the international banking crisis that started in the second week of March 2023 is just the beginning of more to come. After Credit Suisse was affected amid the global decline of confidence in the banking sector, some now fear that German bank Deutsche Bank could be the next victim. What does this mean for the Indonesian rupiah?
In line with expectations, the central bank of Indonesia (Bank Indonesia) kept its benchmark interest rate (BI 7-Day Reverse Repo Rate) at 5.75 percent after the two-day policy meeting on 15-16 February 2023. It also kept its deposit facility and the lending facility at 5.00 percent and 6.50 percent, respectively.
As expected, the central bank of Indonesia (Bank Indonesia) decided to impose a 50 basis points (bps) interest rate hike after concluding its two-day monetary policy meeting on 16-17 November 2022.
Again, the central bank of Indonesia (Bank Indonesia) kept its benchmark interest rate (called the ‘BI Seven-Day Reverse Repo Rate’) at 3.50 percent after concluding its latest monetary policy meeting (on 20-21 July 2022).
Around a month ago, economists in the West started to become increasingly certain that the US Federal Reserve (Fed) is to announce a plan to taper its asset purchases. Not only that, they also expect the announcement to come soon.
The central bank of Indonesia (Bank Indonesia) decided to leave its interest rates unchanged at the two-day monetary policy meeting that ended on 20 April 2021. The benchmark BI Seven-Day Reverse Repo Rate was held at 3.50 percent, while the deposit facility and lending facility rates were kept at 2.75 percent and 4.25 percent, respectively.
The Indonesian rupiah, which had been under heavy pressure in March 2020 amid novel coronavirus (COVID-19) panic, rebounded in April 2020 (albeit policymakers emphasize that the Indonesian rupiah remains undervalued at the moment).
