Indonesia Records Foreign Capital Inflows of $3.5b in January

Bank Indonesia recorded foreign capital inflows of Rp 46 trillion ($3.5 billion) in January. (Antara Photo/Muhammad Adimaja)

By : Adinda Normala | on 5:40 PM January 29, 2018
Category : Business, Banking/Finance

Jakarta. Bank Indonesia recorded foreign capital inflows of Rp 46 trillion ($3.5 billion) between Jan. 1 and Jan. 26, a 170 percent increase from the same period last year.

"This shows foreign investors have put trust in Indonesia's economy," Bank Indonesia governor Agus Martowardojo said on Friday (26/11).

The inflow should help improve the country's resilience against external risks, especially the United States Federal Reserve's plan to increase its benchmark rate, Agus said.

According to analysts, the Fed is expected to cut its basis points at least two times from the current rate of 1.5 percent.

Separately, National Development Planning Minister Bambang Brodjonegoro emphasized maintaining economic stability to anticipate the Fed's interest rate hike.

"They [the United States] have to do rebalancing, so there will be pressure on the exchange rate and it will affect the capital inflow. We must strengthen our economic stability," Bambang told reporters.

"Stability is important as it can protect us from turbulence due to the Fed's rate increase," he said.

In January, Bank Indonesia held its seven-day reverse repurchase rate at 4.25 percent for a fourth straight month, considering the recovery in the domestic economy despite rising inflationary pressure due to increasing food prices.

The central bank also kept it deposit and lending rates unchanged, at 3.50 percent and 5.00 percent respectively.

Meanwhile, the Deposit Insurance Corporation (LPS) projects the central bank's interest rate will remain at 4.25 throughout 2018, as inflation is expected to remain between 2.5 percent and 4.5 percent, and global central banks are unlikely to sharply raise their interest rates.

According to LPS, the European Central Bank is expected to keep its rate at 0 percent in 2018, the Bank of Japan at minus 0.1 percent and the People's Bank of China at 4.35 percent.

The Financial System Stability Committee (KSSK), comprising of a group of policy makers from the Ministry of Finance, Bank Indonesia, the Financial Services Authority (OJK) and LPS, has a positive outlook on the Indonesian economy on the back of domestic recovery.

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