MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, December 2018

  • Bank Indonesia’s unexpected rate hike last month over widening deficits in current account as well as capital flows volatility has contributed to ppreciation of Rupiah in the last six weeks. Subdued inflation despite exchange rate volatility can be explained mostly by the lower demand for consumption due to lower commodity prices, higher interest rate, and government insistence to maintain retail price of the subsidized fuel. On the external factor, we see that flattening yield curve of US Treasuries adds uncertainty to the global market. Nevertheless, except for the worse than expected trade balance data in November, most of the push and pull factors for capital inflow are working in favour of Rupiah for the next several months. Currently, by the year-to-date depreciation rate, among the emerging economies, Rupiah is among the least affected currencies by the global shocks. We view that Bank of Indonesia does not need to hike its policy rates this month.…
    20 Dec
    20 Dec
  • Pada bulan November 2018, inflasi tercatat sebesar 0,27% (mtm) atau 2,50% (ytd). Tingkat inflasi bulan ini sedikit menurun dibandingkan tingkat inflasi bulat Oktober 2018 sebesar 0,28% (mtm), namun lebih tinggi dibandingkan bulan November 2017 sebesar 0,20% (mtm).Tingkat inflasi bulan November 2018 sesuai dengan prediksi LPEM FEB UI pada analisis sebelumnya di mana inflasi diprediksi tetap terjadi dalam level rendah. Inflasi bulan November 2018 mayoritas disebabkan oleh kenaikan harga tiket pesawat dan bahan bakar minyak (BBM) nonsubsidi.…
    04 Dec
    04 Dec
  • Inflation rate seems to follow its seasonal pattern in general; after two months of consecutive deflation, month-to-month inflation rate has started to climb in anticipation of seasonal  increase in consumption around Christmas and New Year. Impact of the increase in nonsubsidized fuel prices have also started to materialize in the inflation rate. Stronger domestic demand, along with receding external pressures following announcement of trade  talks between China and US, are among the reasons to be rather optimistic about general trend in financial market. This more sanguine outlook is  reflected by recent upward movement of Rupiah. Bank Indonesia can afford to hold its interest rate this Thursday; BI should increase its policy rates  again in December.…
    14 Nov
    14 Nov
  • Current account deficit and political climate will be two of the key themes that will affect Indonesia’s economy in 2019. Relatively weak export performance due to overreliance on raw materials export, particularly on crude palm oil, and higher imports due to infrastructure drives have driven Indonesia to run trade deficit again in Q2 and Q3 2018, and we do not see room for trade position to improve significantly in 2019. The downside risk to Indonesia’s trade performance will also be considerable as full-scale trade war threatens to reduce GDP growth in China and United States, which directly accounts for 24.2% of Indonesia’s export value in 2017.  These trade risks, along with rising interest rate and drop in FDI to Indonesia, will put pressure additional on export and Rupiah exchange rate in the medium term…
    03 Nov
    03 Nov
  • Pada bulan Oktober 2018, inflasi tercatat sebesar 0,28% (mtm) atau 2,22% (ytd). Inflasi bulan ini lebih tinggi dibandingkan bulan September 2018 di mana terjadi deflasi sebesar 0,18%  (mtm). Inflasi bulan ini juga lebih tinggi bila dibandingkan dengan inflasi bulan Oktober 2017 sebesar 0,01% (mtm). Inflasi bulan Oktober 2018 sesuai dengan prediksi LPEM FEB UI pada analisis sebelumnya di mana inflasi diprediksi terjadi. Inflasi ini selain didorong oleh komponen bergejolak juga didorong oleh tekanan rupiah kepada harga yang diatur pemerintah serta  harga barang kebutuhan sekunder dan tertier.…
    02 Nov
    02 Nov
  • Rupiah took a paradoxical turn within the last month, where continued rapid depreciation was also followed by second monthly deflation in a row, defying conventional wisdom.  Muted inflation in face of rapid depreciation might be explained by higher interest rate, which slows down the demand for durable goods consumption, and government’s insistence to hold retail fuel price despite higher international crude oil price.  On external side, we still see pressure on Rupiah going forward given persistent current account deficit and continued sign of monetary policy tightening around the world. Given the decrease in inflation, priced-in global shocks in the short run, and potential benefits from the implementation of the negative Tobin tax initiatives,  we argue that holding interest rate on Tuesday may be the best course of action.…
    22 Oct
    22 Oct
  •   Pada bulan September 2018, deflasi tercatat sebesar 0,18% (mtm) atau inflasi sebesar 1,94% (ytd). Deflasi pada bulan September 2018 lebih tinggi dibandingkan deflasi pada bulan Agustus 2018 sebesar 0,05% (mtm). Deflasi bulan September 2018 berbeda dengan inflasi yang terjadi pada bulan September 2017 sebesar 0,13% (mtm). Deflasi ini tidak sesuai dengan prediksi LPEM bulan sebelumnya bahwa diprediksi akan terjadi inflasi rendah pada bulan September 2018 yang didorong oleh efek pengeluaran pendidikan di bulan September 2018. Meskipun pengeluaran pendidikan meningkat di bulan September 2018, besarnya deflasi harga bahan makanan yang di luar ekspektasi mendorong terjadinya deflasi umum.…
    03 Oct
    03 Oct
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