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

Portfolio capital flow has turned positive in the last month, signaling tapered market reactions to expectation of four rate hikes by Federal Reserves this year. Market trust in macro fundamentals of Indonesia and BI’s signal of firm commitment to defend Rupiah against further depreciation also helped to improve market sentiment and stabilize USD/IDR exchange rate around 13,700 level. Headline inflation also have improved, with 3.40% headline inflation and 2.67% for core inflation signaling slow but steady improvement of consumptions. With remaining risks for Rupiah comes mostly from exchange rate, Bank Indonesia should continue its course of defending Rupiah through direct intervention in forex market and hold policy rate steady.

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