Bank Indonesia may ease monetary policy if data supports, says governor

A security guard stands near a gate outside Bank Indonesia headquarters in Jakarta, Indonesia.
A security guard stands near a gate outside Bank Indonesia headquarters in Jakarta, Indonesia. PHOTO: REUTERS

JAKARTA (BLOOMBERG) - Indonesia's central bank may ease monetary policy further in September or October if economic data supports a move, Governor Agus Martowardojo said.

Bank Indonesia, which left its new benchmark interest rate unchanged at 5.25 per cent last month, is still in easing mode, Mr Martowardojo told reporters in Jakarta on Friday (Sept 9). The bank had lowered borrowing costs four times this year. It may adjust the key seven-day reverse repurchase rate, the reserve requirement ratio or macroprudential instruments, he said.

"If later at the September or October board of governors meeting, if the data is supportive, it's likely we will take a looser monetary policy position, subject to there being supportive data," he said.

Inflation in South-east Asia's biggest economy undershot the bank's 3 per cent to 5 per cent target in August, reaching 2.79 per cent. At the same time, growth is under pressure and is set to be closer to the lower end of the central bank's 4.9 per cent to 5.3 per cent target this year.

Bank Indonesia expects inflation to remain low, the rupiah to be stable and loan growth to be weak. Inflation is set to reach 3.02 per cent in September as prices of some food products pick up, while capital inflows will continue to support the rupiah's strength, Mr Martowardojo said.

The central bank expects credit to expand 7 per cent to 9 per cent this year, far short of its previous target of 12 per cent to 14 per cent as recently as June, he said.