Macro Brief
Office of Chief Economist
BI 7-DAY (REVERSE) REPO RATE
19 October 2023
Economic Indicators
Real GDP (% yoy)
Inflation (% yoy, eoy)
Inflation (% yoy, avg)
IDR/USD (eoy)
CA (% of GDP)
BI 7-day RR Rate (%)
F = OCE BMRI forecast
yoy = year-on-year
eoy = end of year
avg = average
Key Rates (%)
BI 7-day RR Rate
Deposit Facility Rate
Lending Facility Rate
IDR 10Y Bond Yield
Fed Funds Rate
ECB Rate
BoE Rate
BoJ Rate
*) as of 19-Oct-23
Source: Bloomberg
Andhi Prasetyo Hadi
Economist
andhi.hadi@bankmandiri.co.id
Shahifa Assajjadiyyah
Economist
shahifa.assajjadiyyah@bankmandiri.co.id
Bank Indonesia Unexpectedly Raised BI-7DRRR to 6.00% in Oct-23
Board of Governors Meeting.
2023
2022
Prognosis The decision was to ensure financial stability and that Indonesia has a robust
5.31 5.04 external resilience amidst rising uncertainties in the global market.
5.51 3.00 - In Oct-23 governor meeting, Bank Indonesia (BI) unexpectedly raised its
4.21 3.79
benchmark interest rate, the BI 7-Day Reverse Repo Rate (BI-7DRRR), by 25 bps
15,000-
to 6.00%. BI also raised the deposit facility rate by 25 bps to 5.25% and the lending
15,568 facility rate to 6.75%, respectively.
15,300
0.96 -0.65 - The increase is to strengthen and stabilize the financial market from the impact
5.50 6.00 of rising global uncertainties. As of 18-Oct-23, Indonesia government 10 year
bond yield was reaching to 6.92%, marking a 12.3 bps increase on mtd. Capital
outflow in stock market was recorded at IDR 1.7 tn mtd, while outflow in
government bond was even bigger, specifically reaching IDR 10.1 tn mtd.
- This decision was also a pre-emptive and forward-looking measures to mitigate
risks of rising global energy and food prices which could influence imported
inflation to domestic economy. By this being done, Bank Indonesia is making
sure that domestic inflation remains under control within the target of 3.0±1%
in 2023 and 2.5±1% in 2024.
Dec-22 Oct-23*
Bank Indonesia also announced several measures to strengthen the stability of the
5.50 6.00
financial market and the resilience of the economy.
4.75 5.25 - Amid the rising pressure on the currency, BI will continue the triple intervention
6.25 6.75 measures I.e. intervention in the foreign exchange market in spot transactions,
6.92 7.05 Domestic Non-Deliverable Forward (DNDF), and purchase of Government
4.50 5.50 Securities (SBN) in the secondary market;
- Sekuritas Rupiah Bank Indonesia (SRBI) has showed progress in absorbing
2.50 4.50
liquidity. Until the last auction on 13-Oct-23, nine auctions have been held,
3.50 5.25
showing that nominal won on the auctions reached IDR 113.7 tn. Foreign
-0.10 -0.10 investors also took participation as shown from foreign ownership recorded at
7% of the total (as of Sep-23).
- Bank Indonesia announce new monetary instruments, Sekuritas Valuta Asing
Bank Indonesia (SVBI) and Sukuk Valuta Asing Bank Indonesia (SUVBI) aimed
to deepen the money market and support efforts to attract portfolio inflows.
These are foreign currency securities issued by BI with short-term tenor (≤1
year) using underlying assets in the form of foreign currency securities owned
by Bank Indonesia. These instruments will begin to be implemented on 21-Nov-
23. SVBI will be issued in tenors of 1, 3, 6, 9 and 12 months. The Sukuk Valuta
Asing Bank Indonesia (SUVBI) is relatively similar in fashion, but using sharia
principles. The SUVBI will be issued with tenors of 1, 3, and 6 months. Similar
to SRBI, these instruments can also be transferred and owned by non-banks
(residents or non-residents) in the secondary market.
- BI will also continue to strengthen the implementation of liquidity incentive
I.e. the Macroprudential Liquidity Incentive Policy (KLM) to encourage bank
credit/financing to priority sectors, including downstream (mineral and coal,
agriculture, plantations, and fisheries), housing (including public housing),
tourism and creative economy, MSMEs, KUR, Micro, and green which has been
in effect since October 1, 2023. The measure is expected to add IDR50 tn of
liquidity in the banking system. As of now, around 120 banks have utilized the
incentives which create additional liquidity of IDR28.79 tn.
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Macro Brief Ó Office of Chief Economist
Macro Brief
Office of Chief Economist
BI 7-DAY (REVERSE) REPO RATE
19 October 2023

- BI also issued liquidity easing policy by reducing the Macroprudential

Liquidity Buffer (PLM) ratio by 100 bps from 6% to 5% for Conventional
Commercial Banks (BUK) with repo flexibility of 5%; and Islamic PLM ratio by
100 bps from 4.5% to 3.5% for Sharia Commercial Banks/Sharia Business Units
(BUS/UUS), with repo flexibility of 3.5%. The policy is expected to bring an
estimated additional liquidity of IDR81.5 tn and will be effective from December
1, 2023.
- Other macroprudential measures maintaned i.e. the Countercyclical Capital
Buffer (CCyB) Ratio at 0% and the Macroprudential Intermediation Ratio (RIM)
in the range of 84-94%.
- Continuation of the relaxation of the Loan to Value/Financing to Value
(LTV/FTV) ratio which was supposed to be completed by the end of 2023,
extended until December 31, 2024; for property loans to a maximum of 100%
for all types of properties (landed houses, flats, and shop houses) for banks that
meet certain NPL/NPF criteria, to encourage property sector credit growth.
Down payment requirements for motor vehicle loans/financing to at least 0%
for all types of new motor vehicles, to encourage credit growth in the
automotive sector with the aim of driving economic growth from the banking
and financing institutions.

Volatility and uncertainty in the global markets will remain high, hence Indonesia
need to strengthen domestic economy.
- Bank Indonesia is cautious on several global conditions that need to be
monitored: (1) Global economic growth is expected to experience slowdown in
2023, with a widening gap of growth divergence between countries. (2) Rising
and unpredictable geopolitical risk, potentially causing an increase in world
crude oil prices, as well as food prices, which can cause pressure on global
inflation. (3) Higher for longer global policy rates especially in the US. Bank
Indonesia sees there is a 40% probability that the Fed will raise interest rates in
Dec-23 and may start to cut in the second half of 2024. (4) In the midst of this
high uncertainty, there is a risk that investors will tend to be risk averse and
switch to US Dollar. This will put pressure on capital outflows from emerging
countries, including Indonesia.

Indonesia's economic growth so far remains robust, and inflation is effectively

managed within the specified target range.
- Credit in September 2023 grew 8.96% yoy, slightly weaker compared to the
previous month at 9.06% yoy. Banking liquidity during September 2023
remained stable, with deposits growing at 6.54% yoy or slightly higher
compared to the previous month of 6.24%.
- Domestic inflation remains well within Bank Indonesia's target and at a low
level though facing some inflationary risk particularly coming from the energy
and food price. BI is currently collaborating with the government to ensure food
price stability, particularly rice and beef. It is estimated that rice supply will be
sufficient until the first quarter of 2024 in line with the government's efforts to
secure supply through import, which will help maintain price stability until
Lebaran. BI's forecast for inflation by the end of 2023 is around 3%.

OUR VIEW: BI’s decision to raise rate along with other macroprudential measures
will support financial stability which is needed for a resilient economy.
- Market volatility may remain high in the short term amid lingering concerns on
global economic slowdown, higher-for-longer interest rates and the ongoing

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Macro Brief Ó Office of Chief Economist
Macro Brief
Office of Chief Economist
BI 7-DAY (REVERSE) REPO RATE
19 October 2023

geopolitical tension in the middle east. The next key event to watch is the FOMC
Meeting at Nov 23. Market consensus broadly expect the FFR to be unchanged,
but hinted at a possible rate hike at the end of the year. Market also expects a
rate cut can happen in the second half next year.
- On the domestic front, Indonesia's inflation rate has declined and consistently
resides within the target range of 2 – 4%. Therefore, we think BI’s main focus is
now on the currency. Going forward, we think the current BI Rate should be
sufficient to maintain the attractiveness of the Rupiah assets and attract capital
flows, though this will still depend especially on Fed’s monetary policy and the
recent development of the geopolitical risk, particularly on the escalation of
conflict between Israel and Hamas.

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Macro Brief Ó Office of Chief Economist
 Macro Brief
Office of Chief Economist
BI 7-DAY (REVERSE) REPO RATE
19 October 2023

BI-7DRRR Inflation Rate Target

9
7 Inflation
6.00 8 Core Inflation
6 Upper Bound Target
7 Lower Bound Target
5
5.50 6

4 5
% yoy

% yoy
4.00
3 4
2.28
2 3 2.28

2
1
2.00 2.00
1
0
0
Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Mar-23
Jan-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
May-23
Jul-23
Sep-23

May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
May-18
Sep-18
Jan-19
May-19
Sep-19
Jan-20
May-20
Sep-20
Jan-21
May-21
Sep-21
Jan-22
May-22
Sep-22
Jan-23
May-23
Sep-23
Indonesia's Inflation (% yoy) BI-7DRRR FFR
Source: Bank Indonesia, BPS, & the Fed Source: Bank Indonesia & BPS

Rupiah Exchange Rate Current Account Balance

16000 12 25 1.67 1.34 2.0

15,359 1.14
15500 10 0.31 1.13
20 -0.41
8 0.38 1.0
15000 15 0.90
6
-1.18
14500
IDR per USD

10 0.0
4
-1.22 0.48 -0.55
14000 0.75 2 5 % of GDP
USD bn
%

0.18 -1.0
0 0 -0.65
13500
-2 -5 -2.0
13000
-4
-10
12500 -6 -3.0
-15
12000 -8
-20 -4.0
Mar-18
Sep-18
Mar-19
Sep-19
Mar-20
Sep-20
Mar-21
Sep-21
Mar-22
Sep-22
Mar-23
Sep-23

1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23

Currency MTD Movement (- is appreciation, + is Goods - lhs Services - lhs

depretiation) -rhs Primary Income - lhs Secondary Income - lhs
Rupiah Exchange Rate - lhs CA - rhs

Source: Bloomberg (as of 21-Sep-23) Source: Bank Indonesia

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Macro Brief Ó Office of Chief Economist
Macro Brief
Office of Chief Economist
BI 7-DAY (REVERSE) REPO RATE
19 October 2023

Macroeconomic and Financial Market Research Department

Chief Economist
Andry Asmoro

Head of Macroeconomic and Financial Market Research

Dian Ayu Yustina

Senior Quantitative Analyst

Reny Eka Putri

Junior Economist
Andhi Prasetyo Hadi

Junior Economist
Shahifa Assajjadiyyah

Office Address:

Plaza Mandiri 18th Floor

Jl. Jend. Gatot Subroto Kav. 36 – 38, Jakarta 12190, Indonesia

Tel: +62 21 5245516

Fax: +62 21 5210430

email: oce@bankmandiri.co.id
www.bankmandiri.co.id

Disclaimer: This material is for information only. The information herein has been obtained from sources believed to be reliable, but
we do not warrant that it is accurate or complete, and it should not be relied upon as such. Opinion expressed is our current opinion
as of the date appearing on this material only, and subject to change without notice. It is intended for the use by recipient only and
may not be reproduced or copied/photocopied or duplicated or made available in any form, by any means, or redistributed to others
without written permission from PT Bank Mandiri, Tbk. For further information please contact Office of Chief Economist,
Macroeconomic and Financial Market Research Department at Ph. (021) 524 5272 or Fax. (021) 521 0430.

Page 5 of 5
Macro Brief Ó Office of Chief Economist