Economist at UOB Group Enrico Tanuwidjaja reviewed the recent decision by the Bank Indonesia (BI) to leave rates intact although signalling the probability for extra cuts.
Key Quotes
“Bank Indonesia (BI) maintained its benchmark rate at 4.50% in April 2020 monetary policy meeting (MPC), consequently maintained the Deposit Facility rate at 3.75%, as well as the Lending Facility rate at 5.25%. BI reiterated that the decision is in line with the need to maintain external stability amidst heightened global financial market uncertainty.”
“Moreover, BI stated mitigation steps to manage the COVID-19 crisis: Intensity the triple intervention policy through the spot and Domestic Non-Deliverable Forward (DNDF) markets, as well as purchasing government securities (SBN) in the secondary market; step up its quantitative easing measures to boost banks’ liquidity; raise the Macroprudential Liquidity Buffer (MLB) by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units, effective from 1st May 2020; increase the uptake of non-cash payment instruments in order to contain the COVID-19 spread.”
“BI also lowered its growth forecast to 2.3% for 2020 from 4.2-4.6% previously (in the light of social restrictions to contain COVID-19 which have eroded incomes and reduced production), albeit expecting GDP to recover higher in 2021.”
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