BI Decided to Keep the 7D RR rate Unchanged at 3.5%
Tuesday, September 21, 2021       16:12 WIB

Key takeaways from BI Board meeting:
1. Bank Indonesia sees global economic continue to recover to bring more stability and keep the expectation of global growth at 5.8%. BI sees recent default case in China and the Fed's monetary policy decision to be influencing global financial volatility and will impact to capital flows to emerging market. On China default case, BI said that domestic economic resiliency will play more dominant role. Whilst on the Fed's recent tapering, BI said that it will be less harmful from previous tapering due to (1) The Fed's better policy communication that says the tapering will likely start in Nov21 and increase in the Fed Fund rate will be at 3Q2022 thus BI could anticipate better, (2) BI prepares the stabilization anticipation via triple intervention using Spot, USD DNDF and SUN buying in secondary market (3) current economic resiliency indicator (CAD, Reserves, etc) suggest higher ability to withstand global volatility emanating from the Fed's tapering
2. On domestic economy, Bank Indonesia said economic recovery in 2H21 will continue with vaccination and keep economic growth expectation at 3.5% - 4.3% for the year 2021 (4.3% in 3Q21 and 5.0% in 4Q21). Meanwhile, inflation in 2021 would be on BI's target at 2.0% - 4.0% and committed to keep inflation figure to be manageable. Bank Indonesia stated its commitment to finance the state budget that comply with SKB 1 (April 2020). In 2021 (as of 17 Sep), BI had Bought Rp139.84tr worth of SUN in primary market (Rp75.6tr via green shoe).
3. Bank Indonesia sees the banking liquidity situation to be very ample, with very high LCR indicator at roughly 32.7% mtd. BI is committed to channel the abundant liquidity in the banking system. The private loan growth continues to grew by +1.2% yoy in Aug21 (+0.5% yoy in Jul21), supported by working capital and home loan increase. BI keep the private loan growth target at 4 - 6% in FY2021 Meanwhile the deposit growth slowed down to 8.8% yoy in Aug21 (+10.4% yoy in Jul21).
Our take:
We see the policy rate at 3.5% shall be maintained until year-end. We believe BI rate adjustment will only happen if Rupiah depreciation breach a certain level, indicatively above 14% yoy (the rate of depreciation that happened in the first tapering in 2013). The policy rate at 3.5% is the optimal level to support economic recovery and at the same time guard the exchange rate stability, in our view. (Reseach Indo Premier)

Sumber : IPS