photo source : kontan.co.id

It was decided at the Board of Governors’ Meeting, convened on 14th August 2014, to hold the BI rate at a level of 7.50%, with the lending facility and deposit facility rates maintained at 7.50% and 5.75% respectively. Such policy is consistent with efforts to guide inflation towards its target corridor of 4.5±1% in 2014 and 4.0±1% in 2015, as well as reduce the current account deficit to a more sustainable level.

Bank Indonesia acknowledges the ongoing economic re-balancing process, underpinned by tenacious macroeconomic stability, as corroborated by moderating domestic demand and falling inflation despite a burgeoning current account deficit in line with seasonal trends during the second quarter of 2014.

Internationally, BI assessments indicate that the global economic recovery continued during the reporting period. Supported by economic momentum in advanced countries as accommodative monetary policy endured and fiscal pressures eased. Revised up GDP figures for the first quarter of 2014 along with sound actual GDP data in the subsequent quarter indicate growing traction in the US recovery as investment, consumption and the external sector expand.

Meanwhile, economic growth in developing countries is expected to remain relatively limited, thereby exacerbating the ongoing downward trend in international commodity prices. Economic growth in China picked up during the second quarter of 2014 due to the stimuli introduced. Looking forward, a number of global risks require monitoring, for instance the normalisation policies of the Federal Reserve and Bank of England, as well as the risk of spillover and spillback from sluggish emerging market economies.

Domestically, the economy cooled off during the second quarter of 2014 due to a contraction in exports, specifically natural resource based commodities. The domestic economy expanded by 5.12% (yoy) in the second quarter of 2014, down from the 5.22% (yoy) posted in the preceding quarter as a result of weaker export performance of natural resource based commodities, such as coal, CPO and minerals.

Moving forward, economic growth is projected to continue moderating as domestic demand wanes despite stronger export performance. In general for 2014, the domestic economy is expected to expand in line with the previous BI projection of 5.1-5.5%, with a bias towards the lower end of the range.

Cited from : The Central Bank of Indonesia Official Website