The BI Board of Governors Meeting agreed on 18th and 19th October 2021 to hold the BI 7-Day Reverse Repo Rate at 3.50%, while also maintaining the Deposit Facility (DF) rates at 2.75% and Lending Facility (LF) rates at 4.25%. The decision is consistent with the need to maintain exchange rates and financial system stability amid projected low inflation and efforts to revive economic growth. In addition, Bank Indonesia continues to optimise its policy mix towards maintaining macroeconomic and financial system stability, while supporting national economic recovery efforts through the following measures:
- Maintaining rupiah exchange rate policy to preserve stability in line with the currency’s fundamental value and market mechanisms.
- Continuing the strengthening strategy for monetary operations to reinforce the effectiveness of the accommodative monetary policy stance.
- Maintaining an accommodative macroprudential policy stance by holding: (i) the Countercyclical Capital Buffer (CCyB) at 0%, (ii) the Macroprudential Intermediation Ratio (MIR) in the 84-94% range with a lower disincentive parameter of 80% (1st September-31st December 2021) and 84% (1st January 2022), and (iii) the Macroprudential Liquidity Buffer (MLB) at 6% with repo flexibility at 6%, and the Sharia Macroprudential Liquidity Buffer (SMLB) at 4.5% with repo flexibility at 4.5%.
- Maintaining looser downpayment requirements on automotive loans/financing at 0% for all types of new motor vehicle, while applying risk management and prudential principles, effective from 1st January 2022 until 31st December 2022.
- Maintaining a looser Loan/Financing-to-Value (LTV/FTV) ratio on property loans/financing to a maximum of 100% on all property types (landed house, apartment and shop/office house) for banks meeting specific NPL/NPF criteria, while removing regulations stipulating the gradual liquidation of partially prepaid property to revive credit growth in the property sector in line with risk management and prudential principles, effective from 1st January 2022 until 31st December 2022.
- Strengthening prime lending rate (SBDK) transparency in the banking industry by expanding the assessment of policy rate transmission to prime lending rates and interest rates on new loans in the banking industry by economic sector/subsector (Appendix).
- Implementing the first phase of BI-FAST, starting in the second week of December 2021, based on policies covering participation, provision of infrastructure, maximum transaction value and price schemes, to be announced on 22nd October 2021.
- Extending credit card policy as follows: (a) Minimum payment equal to 5% of the outstanding balance until 30th June 2022. (b) Late payment penalty equal to 1% of the outstanding balance or a maximum of Rp100,000 until 30th June 2022.
- Accelerating local currency settlement (LCS) implementation to facilitate trade and investment with partner countries by strengthening synergy with the Government, Financial System Stability Committee, banking industry and corporate sector.
- Expanding support for the Government by facilitating trade and investment promotion with partner countries. In October and November 2021, promotional activities will be organised in Japan, United Arab Emirates, China, Australia, United States, UK, Russia, Bulgaria and Singapore.
Bank Indonesia will also continue to strengthen policy coordination with the Government and Financial System Stability Committee to maintain financial system stability and revive bank lending to the corporate and priority sectors, which will help catalyse economic growth and exports as well as economic and financial inclusion.
The global economic recovery is proceeding slower than previously projected. Economic growth projections for the United States, China and Japan have been downgraded due to the impact of the highly contagious Delta variant of Covid-19, coupled with supply chain disruptions and global energy limitations. In contrast, a faster economic recovery in Europe remains intact, thus offsetting global moderation. In September 2021, several early indicators trended downwards, including the Purchasing Managers Index (PMI), retail sales and consumer confidence. Therefore, Bank Indonesia revised its global economic growth projection for 2021 to 5.7% from 5.8%. World trade volume and international commodity prices continue to rise, thus supporting the export outlook in developing economies. The global economic recovery is predicted to endure in 2022 but the impact of supply chain disruptions and energy limitations demand vigilance. Global financial market uncertainty has eased slightly despite concerns of tighter global monetary policy sooner than previously expected in line with persistently higher inflation. Such conditions are influencing global flows of portfolio investment to developing economies, particularly countries offering attractive financial assets for investment and promising economic conditions.
Domestic economic gains are enduring. In the third quarter of 2021, economic performance is expected to continue improving on the back of solid exports as well as increasing consumption and investment activities in line with greater public mobility. By sector, the Manufacturing Industry, Mining,…
Read More: Synergy Maintaining Stability and Strengthening Recovery