Indonesia's Monetary Base Growth Moderates Amid Government Liquidity Measures

Overview of Monetary Base Performance

Bank Indonesia reported that the adjusted monetary base (M0) grew by 14.4% year-on-year to reach Rp2,117.6 trillion as of October 2025. This growth represents a slowdown from the previous month's 18.6% YoY expansion. The moderation in growth is attributed to the combined effects of commercial banks' reserve management and currency circulation trends.

Components of Monetary Base

The monetary base comprises several key components: Rp1,200 trillion in currency circulation, Rp923.1 trillion in commercial banks' adjusted reserves at Bank Indonesia, Rp3.86 trillion in private sector deposits at BI, and Rp25.3 trillion in Bank Indonesia's securities held by the private sector. The adjusted monetary base figure isolates the impact of liquidity incentives provided by the central bank.

Factors Influencing Monetary Base Growth

The growth in adjusted monetary base was influenced by a 27.1% YoY increase in commercial banks' adjusted reserves at Bank Indonesia and a 13.4% YoY rise in currency in circulation. Bank Indonesia's Executive Director for Communication, Ramdan Denny Prakoso, noted that these factors contributed to the overall monetary base performance. The adjusted figure accounts for the effects of monetary operations and liquidity incentives.

Government Liquidity Measures

The slower growth in monetary base coincides with the Finance Minister's decision to place Rp200 trillion in state-owned banks (Himbara). This significant liquidity measure has implications for the banking system's overall liquidity dynamics and monetary policy transmission. The placement affects the monetary base growth by altering the distribution of liquidity within the financial system.

Implications for Monetary Policy

The moderation in monetary base growth, coupled with the government's liquidity measures, suggests a complex monetary environment. The central bank's management of liquidity through various instruments, including monetary operations and reserve requirements, continues to play a crucial role in shaping the monetary landscape. The adjusted monetary base metric provides a clearer picture of underlying trends by isolating the impact of specific policy interventions.