Bank Indonesia : Money Supply Declines in October 2017

Broad money (M2) growth, as a measure of liquidity in the economy, moderated slightly in October 2017. M2 stood at Rp5,283.3 trillion, with growth decelerating from 10.9% (yoy) the month earlier to 10.6% (yoy) due predominantly to quasi-money, which slowed from 9.2% (yoy) to 8.7% (yoy).

Based on the affecting factors, the main impediments to M2 growth included a contraction of financial operations by the Central Government combined with slower growth of Net Foreign Assets (NFA). The contraction was signalled by an increase of obligations on the Central Government in the form of deposits held by Bank Indonesia and the banking industry, accelerating from -0.3% (yoy) the month earlier to 9.8% (yoy) at the end of October 2017. Meanwhile, NFA growth decreased from 20.5% (yoy) in September 2017 to 18.1% (yoy) in October 2017. On the other hand, loans disbursed by the banking industry totalled Rp4,588.5 trillion in the reporting period, with growth expanding from 7.7% (yoy) to 8.0% (yoy).

The banking industry continued to lower lending and deposit rates in response to monetary policy easing transmitted through the credit channel. Lending rates averaged 11.55% in October 2017, falling 5bps on the previous month. Similarly, commercial banks also lowered interest rates on 1, 3, 6 and 12-month term deposits from 6.09%, 6.46%, 6.80% and 6.99% to 5.89%, 6.32%, 6.74% and 6.93% respectively.

Complete information and statistics concerning money supply as well as relevant analyses are available here.