Indonesia: Bank Indonesia to maintain hawkish stance in 2018

  • Bank Indonesia has hinted that it will maintain its tight money policy in 2018 amid the normalization of monetary policies by central banks in other countries.
  • BI Governor Perry Warjiyo said BI’s policy rate would anticipate external factors, stabilize the rupiah’s exchange rate and control the country’s current account deficit.
  • Previously, BI recorded a current account deficit of 2.98% of gross domestic product (GDP) in 2018, which significantly increased from 1.7% in 2017.
  • Perry said BI and the government had to cooperate to narrow the current account deficit to 2.5% of GDP in 2018.
  • While maintaining its hawkish policy, BI will loosen liquidity, he said, adding that the banking sector had got injection through swaps and term purchase agreements, which was needed to encourage economic growth through credit disbursements.
  • Perry said central banks of neighboring countries like India, Thailand and the Philippines had started to normalize monetary policy because they believed that the Federal Reserve’s policy would not be as tight as in 2018.

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