MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, February 2022

After the Delta outbreak, Indonesia is currently facing the Omicron wave. As of 7th February, daily new cases were reported at more than 27,000 cases (7-day moving average) and many predicted it will peak at the end of February 2022.   Despite rising cases, several economic indicators keep progressing, indicating recovery still remains. Similar to GDP that recorded an immense growth of 5.02% (y.o.y) in Q4-2021, yearly inflation rate also drew the same pattern with a notable pick-up of 2.18% (y.o.y) in January 2022 from 1.84% (y.o.y) in December 2022.  However, the recent surge of Omicron cases is expected to slow, or even pause, the economic recovery. From the external side, inflationary pressure that continues to linger around several markets forces several central banks to raise the interest rate. As a result, contractions in domestic market are detected in the short-term, indicated by notable amount of outflow and weaker trend of Rupiah. Given these  circumstances, BI should hold its policy rate at 3.50% this month while observing domestic condition and closely watching the fluctuations in the global market.

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