RHB | Indonesia | BI Raised The Benchmark Rate To 7.75%

Economic Research	19 November 2014
Indonesia
Economic Highlights
BI Raised The Benchmark Rate To 7.75% Bank Indonesia (BI) board of governors’ unscheduled meeting decided to increase the BI rate by 25bps to 7.75% on 18th November2014. In parallel, the lending facility rate is raised by 50bps to 8.0%, while the deposit facility rate is held unchanged at 5.75%. The increase was in response to the recent subsidised fuel price hikes that could push up inflation in the months ahead. As has been mentioned in several monetary policy statements, the BI said that it stands ready to act preemptively, should the government increase the fuel prices. Hence, the move was consistent with the monetary policy stance of anchoring the inflation at the range of 3–5% in 2015. With the unchanged deposit facility rate, the open market operation corridor is being expanded from previous band (see figure 2). This is to assure the liquidity situation in the banking system remains intact and at the same time promoting the financial market deepening. Economist:  Luthfi Ridho  | +6221 2598 6888