BI lifts rates more than expected after Fed hike 

  Bank Indonesia (BI) has passed its second key interest rate hike this year, just a day after the
  United States Federal Reserve raised rates by 75 basis points (bps) for the third time in a row.  

  The BI board of governors decided on Thursday to lift the benchmark seven-day reverse repo
  rate (7DRRR) by 50 bps to 4.25 percent, a figure last seen in June 2020, while the lending
  and deposit facility rates went up 25 bps to 5.00 and 3.50 percent, respectively.  

  Economists from state-owned Bank Mandiri and financial research firm Moody's Analytics had
  expected the rates to rise by just 25 bps, as had those polled by Reuters.  

  BI Governor Perry Warjiyo said more aggressive interest rate hikes were “not needed” in
  Indonesia as the country had managed second-round impacts on core inflation better than
  other countries.  

  "The decision to raise interest rates is a front-loaded, pre-emptive and forward-looking
  measure to lower inflation expectations and ensure that core inflation returns to the target of 3
  plus or minus 1 percent in the second half of 2023," Perry said at a press conference after
  the board's monthly two-day monetary meeting ended on Thursday. 

  BI said the front-loading strategy was necessary to anticipate rising inflation expectations and
  rein in second-round impacts from price hikes, noting that it took time for interest rates to
  impact inflation. 

  Perry expressed hope that the 50 bps hike would bring the rupiah’s exchange rate to its
  “fundamental value”, as Indonesia currently had a “very low current account deficit” and “a very
  good balance of payments”. 

  Gap between RI, US rates has narrowed significantly 

  Data from Bank Mandiri shows that the rupiah has depreciated 5.2 percent against the
  greenback so far this year to trade at Rp 14,998 per US dollar on Thursday.  

  “The exchange rate should have strengthened, [given the] strong domestic demand growth
  [in Indonesia] amid high uncertainty in global financial markets,” Perry continued.  

  The Fed raised interest rates by 0.75 percentage points on Wednesday for the third time in a
  row and suggested further significant increases were inevitable.  

  “We have got to get inflation behind us. I wish there were a painless way to do that. There
  isn’t,” Fed chair Jerome Powell said at a news conference. 

  BI estimated that despite the countermeasures taken, inflation pressure would remain high as
  the recent fuel price hikes and the government’s social assistance would reverberate in the
  next three months.  

  Headline inflation is expected to rise to 5.89 percent year-on-year in September, with full-year
  2022 inflation seen at “a little more than” 6 percent.  

  Year-end core inflation, the prime target of BI’s monetary strategy, is expected to rise to 4.6
  percent yoy, but the rate is predicted to come back down to the target range of 2 to 4 percent in
  the second half of 2023.  

  Finance Minister Sri Mulyani said on Thursday that the Fed’s decision to raise interest rates by
  75 bps had been expected but required caution.  

  “We should keep our guard up for potential capital outflow turmoil due to a very hawkish interest
  rate hike,” the finance chief told reporters.  

  Bank Mandiri economists had predicted that BI would raise the key policy rate to a maximum
  of 4.25 percent by the end of the year. After Thursday’s BI decision, they raised that estimate
  to 5 percent by the end of the year and 5.25 percent in 2023.  

  This policy was needed to mitigate the risk of capital outflow from Indonesia, particularly in the
  sovereign debt papers market, as the trade surplus was expected to shrink amid a slowdown
  in global growth.  

  “The target can be achieved, as long as no more adjustments are made to energy prices while
  food prices are maintained,” Mandiri economist Faisal Rachman told The Jakarta Post on
  Thursday regarding the central bank’s target for core inflation in 2023.  

  University of Indonesia economist Fithra Faisal Hastiadi, meanwhile, said he expected
  September headline inflation to be 5.66 percent and warned of the impact of high
  inflation expectations.  

  With the recent rate "shock" by BI, he said, which was likely to be followed by two more
  increases of 25 bps each, year-end inflation could be kept below 8 percent, though it
  would probably be above 7 percent.  

  “Reactive policies cost much more than anticipatory policies,” Fithra told the Post on
  Thursday. 

  Source: The Jakarta Post 

  Indonesia parliament passes long-awaited data protection bill 

  Indonesia's parliament passed into law on Tuesday a personal data protection bill that includes
  corporate fines and up to six years imprisonment for those found to have mishandled data in
  the world's fourth most populous country. 

  The bill's passage comes after a series of data leaks and probes into alleged breaches at
  government firms and institutions in Indonesia, from a state insurer, telecoms company and
  public utility to a contact-tracing COVID-19 app that revealed President Joko Widodo's
  vaccine records. 

  Lawmakers overwhelmingly approved the bill, which authorizes the president to form an
  oversight body to fine data handlers for breaching rules on distributing or gathering
  personal data. 

  The biggest fine is 2% of a corporation's annual revenue and could see their assets confiscated
  or auctioned off. The law includes a two-year "adjustment" period, but does not specify how
  violations would be addressed during that phase. 

  The legislation stipulates individuals can be jailed for up to six years for falsifying personal
  data for personal gain or up to five years for gathering personal data illegally. 

  Users are entitled to compensation for data breaches and can withdraw consent to use
  their data. 

  Abdul Kharis Almasyhari, a member of the commission overseeing the law, said it would mean
  the state was ensuring protection of the personal data of its people. 

  Communications minister, Johnny G. Plate, said the bill's passage "marks a new era in the
  management of personal data in Indonesia." 

  "One of the obligations for electronic data organizers, whether public or private, is to ensure
  protection of personal data in their system," he told reporters. 

  The law will also ease data transfers between Indonesia and countries with similar legislation,
  lawmaker Nico Siahaan said. 

  The law has been in the works since 2016 and was held up by debate about financial penalties
  and control of the oversight body, lawmakers said. Authorities have said the law was based
  on the European Union legislation. 

  Wahyudi Djafar, who researches data protection for the Institute for Policy Research and
  Advocacy, questioned whether the penalties were strict enough to force government
  bodies to improve their data handling. 

  Source: Reuters 

  ADB Upgrades Indonesia's Growth Forecast 

  The Asian Development Bank, or ADB, the region's multilateral development bank, has
  upgraded its economic growth forecasts for Indonesia this year but penciled in a slower
  growth pace for the next year as the county would likely be impacted by deteriorating
  global growth.  

  In its Asian Development Outlook 2022 September update, ADB projected the largest economy
  in Southeast Asia would expand by 5.4 percent this year, up from its previous projection of
  5.0 percent. The lender revised down growth forecast for 2023 to 5 percent from 5.2 percent. 

  "Domestic demand should remain strong through the rest of this year, despite higher inflation,
  and so should external demand," ADB wrote on its website.  

  "But financial market volatility is still present, a small wave of Covid-19 infections started in
  July, and global growth was worsening at the time of writing. Headwinds from these sources
  will continue through 2023 when the macroeconomic policy will tighten," the lender said.  

  ADB saw Indonesia's inflation—currently one of the lowest among the G20 country—would
  spike in September and remain elevated through December. The lender said the inflation
  would accelerate to 4.6 percent this year, from its previous projection of 3.6 percent.  

  "Because of the base-year effect of subdued inflation in the first half of 2022, inflation is
  forecast at 5.5–6.0 percent through June 2023 and easing to 3.8 percent in December.
  Inflation is forecast to average 5.1 percent in 2023, up from the earlier 3.0 percent
  projection. 

  The Central Statistics Agency (BPS) reported that headline inflation in Indonesia reached
  4.69 percent in August, slowing from 4.94 percent a month earlier. That was before the
  government increased subsidized fuel prices by up to 32 percent earlier this month. 

  Bank Indonesia, the country's central bank, increased its benchmark interest rate by 25 basis
  points last month in anticipation of the increase. Economists expect the central bank could
  raise the rate by 100 basis points by the end of the year to fight inflation.  

  Source: Jakarta Globe