Bank Indonesia raises the benchmark rate for a second time
For the second meeting in a row, Bank Indonesia raised the benchmark interest rate, this time by 50 basis points. The benchmark interest rate currently stands at 4.25%. This policy was decided during the Monetary Policy meeting of September 21-22, 2022. The first increase of the benchmark rate was made at the Monetary Policy Meeting of August 2022, when the Bank raised the benchmark rate by 25 basis points, to 3.75%.
That policy was taken by the Indonesian Central Bank to prevent inflation from rising further. Year-on-year inflation in July 2022 was reported at 4.99%, which raised the concern of the government. Aside from that, Bank Indonesia also remained vigilant regarding the stability of the rupiah. With a number of variables to consider, while at the same time weighing the need to maintain the momentum of economic growth, the move by Central Bank was careful and deserves appreciation.
The Central Board of Statistics in Indonesia released its trade balance report for the month of August 2022. The trade balance registered another large surplus, significantly greater than in July. The August surplus was $5,757 million compared to the $4,218.2 million achieved in July. The total trade surplus for the first eight months of 2022 stands at $34,918.8 million, 68.57% higher than $20,714.6 million achieved in the same period of the previous year. Exports in August reached $27,907.4 million while imports were $22,150.4 million. Cumulative exports from January to August 2022 reached $194,596.9 million while cumulative imports for the same period reached $159,673.1 million. The amount of exports for the month of August 2022 broke a record after surpassing the level of April 2022. One of the main factors in the sharp increase in exports and in the trade surplus was the rebound in CPO (crude palm oil) exports after the government reversed its export ban.
The Central Board of Statistics also reported the Consumer Price Index for August 2022, which showed deflation of 0.21%. With that monthly deflation, Y/Y inflation in reached 4.69%. While higher than the target inflation corridor of the Central Bank, the level of y/y inflation weakened somewhat in August 2022. As mentioned previously, to dissipate the concerns about inflation's rising higher, the Indonesian Central Bank raised the benchmark interest rate by 50 basis points, to 4.25%, at its Monetary Policy Meeting in September 2022.
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