Bank Indonesia has kept its policy instruments on hold, while stating that the transmission of monetary policy is rebounding. The Indonesian central bank kept the reference rate unchanged at 6.75%, the deposit facility at 4.75% and the 7-day reverse repo at 5.5%. There was a slight threat to today’s central bank’s policy decision from a somewhat weaker-than-anticipated first quarter GDP figure. It is evident that the country’s macroeconomic policy is not still at the current stage, said ANZ in a research report. It is actually changing dynamically.
Meanwhile, the central bank has given a clear hint of an easing bias. It mentioned that under the scenario of a stable economy, meaning economic and rupiah stability, the central bank will have the leeway to ease policy, added ANZ. Easing bias, along with a rebounding monetary policy transmission mechanism might be a strong combination.
Also, the Bank Indonesia revised down its 2016 economic growth outlook to 5%-5.4% from its earlier projection of 5.2%-5.6%. If the economy and rupiah stabilize, along with inflation rate meeting the mid-point target, the central bank will have a scope to further easy policy to strengthen lending and hence making the outlook of growth more secure, according to ANZ.
