Institute for Economic and Social Research – Faculty of Economics and Business – Universitas Indonesia

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

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.

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