BI keeps interest rate unchanged as rupiah stabilizes  

According to the central bank, the interest rate hike in April helped the rupiah strengthen by 1.66 percent between the end of April and May 21. 

Bank Indonesia (BI) has kept its benchmark interest rate unchanged at 6.25 percent as it sees the rupiah stabilizing thanks to increased capital inflows following last month’s 25-basis-point (bps) rate hike. 

Briefing reporters after the central bank’s two-day monthly monetary policy meeting, BI Governor Perry Warjiyo noted an increased probability of the United States Federal Reserve cutting its interest rate by the end of this year.  

“At the same time, the worsening geopolitical situation [seen] in April has not continued. A decline in US treasury yields compared with mid-April has caused capital inflows to emerging countries and reduced the pressure on local currencies,” Perry said on Wednesday.  

In last month’s briefing, BI decided to lift its benchmark BI Rate by 25 bps to 6.25 percent. It also raised the rates for its deposit facility and lending facility by the same amount to 5.5 and 7 percent, respectively.  

The central bank characterized the move as a “preemptive measure” in light of global risks caused by the uncertain outlook for monetary policy in the US and geopolitical tension in the Middle East.  

In times of conflict, investors tend to reallocate funds to so-called safe-haven assets, such as the US dollar and gold, resulting in money flowing out of emerging markets and weighing on the countries’ currencies.  

In April, right before BI announced its interest rate hike, the rupiah touched a multiyear low of Rp 16,265 per US dollar.  

According to the central bank, the rupiah strengthened by 1.66 percent between the end of April and May 21 thanks to foreign capital inflows into Indonesian government bonds, underlining the effectiveness of the BI Rate hike in April.  

Perry noted that the rupiah, while still down 3.74 percent year-to-date, had done better than the currencies of other emerging countries, such as the Philippine peso, South Korea’s won and Thailand’s baht, which had depreciated by 4.91 percent, 5.52 percent and 5.59 percent, respectively.  

“In the future, we expect the rupiah to continue to be stable with a tendency to get stronger, pushed by better yields after the benchmark rate hike, a decrease in risk premium, better economic prospects and the central bank’s commitment to keep the rupiah stable,” Perry said.  

The central bank expects domestic economic growth of between 4.7 and 5.5 percent this year, after a year-on-year increase of 5.11 percent logged in the first quarter due to strong consumer spending during Ramadan and the election, as well as increased government spending.  

Private lender Bank Danamon economist Irman Faiz wrote in an analysis on Wednesday that a 100-bps spread between the Fed’s federal funds rate and the BI Rate was sufficient to keep the rupiah stable. 

“Therefore, we expect BI to hold the policy rate throughout this year, with a 25-bps federal funds rate cut in December. Then, BI will have room to follow the Fed’s cut cycle in the first quarter next year at the earliest,” Irman said. 

Source: The Jakarta Post 

Indonesia minister says Musk to consider offer to build EV battery plant in country 

Indonesia's coordinating minister of investment said that Elon Musk will consider an offer to build an electric vehicle battery plant in the country, after the CEO of Tesla met with President Joko Widodo on Monday. 

Musk was not immediately available for comment after minister Luhut Pandjaitan made his remarks to reporters. 

Musk and Widodo met in Indonesia's Bali after both attended the World Water Forum on Monday. "We made an offer, is it possible to build an EV battery plant here, precursor cathode. And he will consider it," Luhut told reporters. 

Luhut said Widodo also asked Musk to consider investing in an AI center in the Southeast Asian country and for SpaceX to build a launchpad in Biak island in Indonesia's Papua province, an offer the government has made before. 

Indonesia's government has been trying for years to lure Tesla to build manufacturing plants related to electric vehicles as the government wants to develop its EV sector using the country's rich nickel resources. 

On Sunday, Musk had launched SpaceX's satellite internet service for the health sector in Indonesia. 

Starlink was now available commercially, but the government would focus its services first on outer and underdeveloped regions. 

SpaceX's Starlink, which owns around 60% of the roughly 7,500 satellites orbiting earth, is dominant in the satellite internet sphere. 

Source: Reuters

Govt allocates US$455 million for electric motorcycle subsidies 

Secretary General of the Ministry of Energy and Mineral Resources Dadan Kusdiana stated that the Indonesian government has readied funding of US$455 million to provide subsidies for the purchase of electric motorcycles. 

"The subsidies will cover the purchase of 800,000 new electric motorcycles and the conversion of 200,000 combustion motorcycles," he said in a statement from his ministry on Thursday. 

He made the statement at the IEA 9th Annual Global Conference On Energy Efficiency in Nairobi, Kenya, on Wednesday (May 22). 

Kusdiana highlighted a price gap between electric vehicles and conventional vehicles. To lower the price disparity, he said, the government is providing tax incentives and subsidies for electric cars, hybrid cars, and electric motorcycles. 

On that occasion, he noted that the Indonesian government is targeting two million units of electric cars and 13 million units of electric two-wheeled vehicles to be operated on the roads by 2030. 

The Ministry of Energy and Mineral Resources is continuing to accelerate the development of supporting infrastructures to build the electric vehicle ecosystem, he said. 

To support the electric vehicle ecosystem, Kusdiana said, the government continues to increase the construction of public electric vehicle charging stations (SPKLUs). It is estimated that 32 thousand SPKLUs need to be available by 2030 to meet demands. 

In addition to building charging stations, the availability of home charging is deemed important. 

To facilitate it, state-owned electricity company PT PLN offers incentives, such as special prices for electrical system upgrades and discounts for overnight charging rates. 

These measures are taken to encourage more people to use electric vehicles by making charging convenient and cost-effective. 

The Indonesian government also acknowledges the significant contribution of road transport to CO2 emissions by developing fuel-saving standards for heavy vehicles as the key to reducing emissions in the short and medium term. 

According to Kusdiana, to reduce transportation emissions, in 2024, the government has allocated 11.8 million tons of biodiesel along with the launch of a blend of 35 percent palm oil for biodiesel, known as B35. 
He remarked that this program can reduce greenhouse gases by 34.9 million tons of CO2. 

Source: Antaranews