MACROECONOMIC ANALYSIS SERIES. BI Board of Governor Meeting, January 2018

December inflation figure gave mixed signal about the exact economic condition, but overall FY 2017 result suggests that a relatively stable inflation has become the norm. Barring any move to cut implicit fuel subsidy, we see 2018 inflation to remain within BI’s goal of 3.5±1%.  While stable inflation and improving global growth will slightly improve 2018 growth, we still view government’s growth target, as set by Ministry of Finance, to be still overly optimistic.  Improvement of growth prospect also still leaves room for more accommodative policy stance,  given still-low core inflation. From external  side, concern about shocks to Rupiah should also be largely reduced by now, given milder-than-expected market reaction to December rate hike by  Federal Reserves. For now, however, Bank Indonesia may want to maintain wait-and-see attitude and hold its policy rate.

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