MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, February 2019

  • The national economy grew slightly higher than market expectations amidst global uncertainty throughout 2018 with the highest recorded growth since 2014 at 5.17% (yoy). Robust fundamental conditions were also reflected in low and stable inflation. The trend of Rupiah appreciation, with Rupiah recorded below Rp14,000 level in early February, has been driven by the strong influx of portfolio capital since October 2018. Last year’s threatening external pressures have slowly subsided along with the weakening global economy that is almost certain to occur in the next two years; this will continue contribute to further lowering global commodity prices. This trend has caused challenges to the national trade balance which is mainly driven by commodities exports such as coal and palm oil. Crude oil price on the other hand will continue to be a source of uncertainty for Rupiah in 2019; the price has hit three-month high as global supply gets cut. Overall, we view that BI should maintain its current policy interest rates this month.…
    21 Feb
    21 Feb
  • Following previous expectation, we see that the economy in Q1 2019 will be slightly improved. A series of unexpected trends since November, such as the reversal of capital flow to emerging markets, lower crude oil prices, and negotiations between US and China, has brought positive sentiment to the domestic market. The effect of the influx of foreign portfolio investment in the last three months has improved Rupiah to be among the most improved currencies together with the currencies of Thailand, the Philippines, and Malaysia, with Rupiah in these past two months trading at around Rp14,000 per US dollar. The trend of declining crude oil price in the next two quarters due to overflow in oil production may give more breathing space for the government; it is likely to improve the trade balance and also reduce pressure on the government’s challenging decision to hold fuel price at the same level until the general election.…
    19 Feb
    19 Feb
  • Inflasi di bulan Januari tercatat turun cukup tajam, di mana inflasi umum secara year-on-year (yoy) dan month-to-month (mtm) tercatat sebesar 2,82% dan 0,32%. Inflasi di bulan Januari ini tercatat sebagai inflasi bulan Januari yang tergolong rendah, di mana inflasi bulanan di  bulan Januari 2018 dan 2017 tercatat masing-masing sebesar 0,62% (mtm) dan 0,97%. Efek dari turunnya harga barang bergejolak merupakan faktor utama yang mendorong penurunan inflasi di bulan Januari kemarin. Dengan frekuensi turun hujan yang cukup tinggi, perbaikan logistik yang dilakukan pemerintah sedikit banyak telah menurunkan tekanan inflasi.…
    04 Feb
    04 Feb
  • Better than expected budget deficit in 2018, amidst the widening current account deficit, has positively affected the market sentiment and helped  Rupiah to appreciate to around 14,000  level. Rupiah is now among the strongest emerging market currencies since October 2018 as portfolio  investments are coming back, despite the Fed rate hike last month. The Fed’s dovish policy stance and US-Tiongkok trade war potential truce have  helped the global investors to start looking at the emerging economies’ assets again. Inflation, on the other hand, is still subdued, signaling slow and  steady consumption, partly due to higher interest rate in 2018. Considering the stable domestic fundamentals, the implementation of negative Tobin  Tax, and the diminishing external risks, we are of the opinion that Bank of Indonesia should hold its policy rate this month.…
    16 Jan
    16 Jan
  • Despite wide fluctuation of international oil price, slightly higher consumption growth, and rapidly depreciating currency, inflation in 2018 remains remarkably low, with headline inflation at 3.13% (y.o.y) in December 2018. Historically, faster consumption growth drives demand for goods and services and thus tend to push inflation higher. Similarly, without additional fuel subsidy budget, higher oil prices would normally push subsidized fuel  prices upward, affecting price of transportation of goods and services and thus increasing prices of most goods and services simultaneously. Also, with more than 90% of imports going towards input and capital goods, depreciating currency would traditionally also accelerate inflation.…
    15 Jan
    15 Jan
  • 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
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