Tag: BI

Market & Fed Rate

As expected the Federal Reserve on Wednesday (Sep 26) raised the target range for the federal funds rate by 25bps to 2%-2.25%. Policymakers increased growth forecasts for 2018 and expect one more rate hike this year.

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Banking: Liquidity Issue

Indonesia’s Deposit Insurance Agency (LPS) recorded that loan to deposit ratio (LDR) of the banking industry reached 93.11% per July 2018, higher than 89.20% in the previous month, reflecting a tightening of liquidity. This would prompt big scale banks and medium scale banks to raise their special rates on deposit and attract depositors.

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Short Term Pressure

The rupiah continued to weaken to Rp14,711 against the U.S. dollar on Friday last week (Aug. 31), gradually approaching a two-decade low. The rupiah depreciation is in line with the performance of most other emerging market currencies amid broad-based U.S. dollar strength, Indonesia is ranked in the top ten of hardest-hit currencies so far in 2018.

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Impressive Gain

After falling 4.3% last week, the composite index of the Indonesia Stock Exchange (IDX) made an impressive rebound or gain on Monday (Aug. 20) along with improving rist appetite ahead of China-U.S. trade talks due later this week.

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The Rupiah

The rupiah weakened further to Rp14,625 against the U.S. dollar on Tuesday (Aug 14), extended correction on Monday, but the central bank (Bank Indonesia/BI) confirmed to have intervened the local currency. The rupiah since Monday passed beyond the psychological boundary of Rp14,600 per U.S. dollar level—its lowest level since October 2015—puts additional pressure on the Indonesian currency as it encourages more people to seek safe haven assets, such as the U.S. dollar or Japanese yen.

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Banking Update

Indonesia’s central bank (Bank Indonesia/BI) indicates a higher growth in new loan for the second quarter (Q2) of 2018, and a strong growth in Q3 this year. BI said that banks will tighten loan disbursement through lifting lending rates and limiting the loan ceiling, mainly loan for investment and working capital.

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Improving Economy

Indonesia’s Central Bank (Bank Indonesia/BI) reported on Thursday (July 12) that the national economy growth signaled a better growth this year and confirmed its strong growth, inline with the improving installed production capacity in all business segments—agriculture, industry, electricity, gas, and drinking water.

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Trade War

Several Indonesian ministers met on Sunday (July 8) at the office of the Coordinating Minister for the Economy to discuss the escalating trade war tension between the U.S. and China. Said ministers formulated strategies and policies to anticipate the impact of said trade war, and another Fed rate hike.

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Property & LTV Policy

Indonesia’s central bank (Bank Indonesia/BI) has recently relaxed the loan-to-value (LTV) ratio in order to maintain domestic economic recovery momentum and financial system stability, keeping into account the prudential principles and consumer protection. The policy will be effective August 1, 2018. By lowering down payment obligations for the consumer, BI aims to make it more attractive for consumers to purchase property using House Ownership Credit (KPR), hence boosting overall credit growth as well as Indonesia’s macroeconomic growth.

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