Bank of Indonesia focus now on stability, not growth

The sudden shift in the central bank's position came in response to the worsening Eurozone debt crisis.

BI seeks to shield the vulnerable Indonesian economy from the shellshock of the renewed global jitters.

Here's more from DBS:

The central bank’s (BI) focus has tilted towards maintaining stability in the economic and financial system as opposed to pushing the pace of GDP growth. This shift has taken place in recent weeks as outflows from Asia accelerated amid a worsening in the Eurozone debt crisis. Although some rupiah weakness is unavoidable, ample liquidity in the banking system, sizable foreign reserves, stable FDI funding and recent policy measures should help reduce disruptions in the financial sector and limit the impact on the real economy.

BI has held on to a pro-growth stance since the global financial crisis in 2008/09 but this stance has become less suitable of late and BI has also adjusted accordingly.

With slow global growth and weak commodity prices, there are risks that the current account may widen if the domestic economy continues to grow strongly relative to its trading partners. In order to manage this risk, BI has opted to tap on the brakes for the economy through a more measured pace of consumer loans. Coupled with weak external demand, this should lead to a slower pace of growth in the coming quarters.