September’s BI Meeting

Effective Policy

Macro Report | Sep 28, 2018

Indonesia Benchmark Rate

Source: Bank Indonesia, NHKS research

Highlights of BI’s Board of Governors Meeting in September 2018

Bank Indonesia (BI) Board of Governors Meeting dated on Wednesday and
Thursday, September 26th and 27th, 2018 decided to raise BI’s 7-Day Reverse
Repo Rate by 25 bps to 5.75%, the fifth hike in 2018 and the highest rate since
May 2016. Since May 2018 BI had raised its benchmark rate by 150 bps.

Ahead of the Curve Benchmark

The Fed’s stance of raising its rates decided at the FOMC meeting dated
September 25th-26th, 2018 preceded BI’s stance of raising benchmark rate.
However, BI’s stance is pre-emptive on the Fed’s potential rate hike in
December. In May 2018, BI took an ahead of the curve policy albeit the chance
of the Fed’s rate hike only hovering at 40%

Focus on Rupiah Stabilization

BI shifted its main target of monetary policy to the rupiah stabilization as the
inflation stable at around 3.0%. The rupiah had been depreciated by 12.2% after
it settled at 13,289, the strongest level in 2018. Besides, forex reserves waned
from USD10.2 billion in January-July to USD17.9 billion in August 2018. The
uptrend benchmark rate hike aligned with the decline in forex reserves,

Shrugging off Pressures on Hiking Rate

Raphon Prima
In 2013, BI raised its benchmark rate by 175 bps from 5.75% to 7.50% in 2013 +62 21 797 6202, ext:214
when the global volatility occurred. Meanwhile, in 2018 BI has raised its raphon@nhsec.co.id
benchmark rates by 150 bps. The trend of stable rupiah starting in September
2018 underpinned by the shrugging off global concern about the U.S. and China
trade war and the Fed’s rate hike in December causes BI to face less intense
Muhammad Rizaldi
pressure on re-raising its rate until the end of 2018. However, to rejuvenate the +62 21 797 6202, ext:164
domestic financial market, BI likely raises its rate once more at the end of 2018. aldi@nhsec.co.id

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NH Korindo Sekuritas Indonesia

 www.nhsec.co.id

Benchmark Rate & USDIDR Benchmark Rate & 10-year Government Bond Yield

Source: Bank Indonesia, Bloomberg, NHKS research Source: Bank Indonesia, Bloomberg, NHKS research

Benchmark Rate & Inflation (y-y) Benchmark Rate & Forex Reserves (USD bn)

Source: Bank Indonesia, Indonesia Statistics, NHKS research Source: Bank Indonesia, NHKS research

Indonesia Benchmark Rate & Fed Funds Rate Benchmark Rate & December Fed Rate Hike Probability

Source: Bank Indonesia, Bloomberg, NHKS research Source: Bank Indonesia, Bloomberg, NHKS research

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