, and improved provisions for jibor ( jakarta interbank offer rate ). distinguished ladies and gentlemen, 21. we are pleased and record that strategic and tactical steps have been initiated by the government on urgent structural reform nodes in order to build a stronger supporting environment for investment. such nodes, primarily strengthening of physical connectivity focusing on maritime and its integration to land connectivity, we believe will significantly decrease logistics cost, making businesses more competitive in the global market and eventually achieving equal cost efficiency throughout the country. 22. slide 15 : another important thing is the government ’ s efforts to reform fuel subsidy, which is very vital to be shifted to strengthen development ’ s basic capital. development of hr quality, infrastructures, and innovative and institutional capacity, which are the basic capital for the national economy to grow stronger and more sustainable, has been hostage to improperly targeted subsidy. therefore, bank indonesia fully supports the “ firm step ”, the benefits of which will be experienced in the coming years. distinguished ladies and gentlemen, 23. slide 16 : at the end of 2014, some initial indications of economic recovery have been observable. stability oriented policies have prevented the national economy from increasingly stronger pressures. the deficit in the current transaction balance in 2014 has been lower to reach – 2. 87 % of gdp, compared to – 3. 18 % in 2013. 24. slide 17 : stability oriented policy has also put more confidence of investors in the quality of indonesia ’ s macroeconomic policies. it is depicted by the large incoming flows of portfolio investment, which reaches rp 181. 5 trillion in 2014. the flows maintain investment enthusiasm in the market price and government securities ( sbn ). 25. slide 18 : along with direct investment, such portfolio investment flows have supported the surplus in indonesia ’ s balance of payment, making the foreign exchange reserves at the end of 2014 reach usd 111. 9 billion ( equal to 6. 5 months of requirements for imports and payment of the government ’ s external debts ), compared to usd 99. 40 billion at the end of 2013. bis central bankers ’ speeches 26. therefore, it will not be exaggerating to say that policy measures taken by the government and bank indonesia have been proven successful at recovering the macroeconomic condition in 2014 to the “ path of stability ”. ladies and gentlemen, 27. overall, indonesia ’ s economic dynamics in 2014 bring some valuable lessons to support sustainable economic growth. 28. first, it is important to maintain consistent macroeconomic policies, both fiscal

cpix because of its demonstrated superiority on both empirical and theoretical grounds. its advantage was confirmed by additional research when our inflation targets were renewed again in 2006, and it has recently been retested as part of a more comprehensive international study looking at a range of measures of total and core inflation. clearly, this process of refinement and retesting never ends. this is because it is crucial that we be able to determine the most effective indicators of underlying inflation and how these might be further refined and improved upon over time. so the next question becomes : how can we distinguish between good and bad measures? an effective core measure must have four key properties. first, and most obviously, a core measure should be less volatile than total inflation. second, it must be unbiased. by this we mean that the core inflation measure must track long - run movements in the total cpi very closely. third, a good core measure must also be a reliable predictor of future trend movements in the total cpi. fourth, a good core measure must be easy to understand and to explain to the public. when all four requirements are considered together, cpix has been shown to be as good as, or better than, all of the alternative measures that the bank might use. other measures may outperform cpix when they are judged on just one or two of these four criteria. cpiw, for example, which is calculated using the reweighting method, can give slightly better predictions of the total cpi and bears a somewhat tighter relationship to the long - run trends in the total cpi. these differences are very minor, however, and are offset by other considerations such as ease of understanding. for this reason, cpix is still the bank's preferred core measure. nevertheless, given the demonstrated strengths of cpiw and one or two other trend measures, the bank continues to monitor a set of indicators rather than relying on any single one. popular misconceptions about core inflation our choice of cpix as an operational guide for monetary policy has, at times, been a source of controversy and has led to several popular misconceptions. journalists and other interested observers frequently question the use of cpix and other measures of trend inflation as operational guides. they argue that such measures give an overly sanguine picture of true inflation, especially during episodes of sharply rising food and energy prices. critics say that cpix inflation is frequently lower than total cpi inflation because, they claim, the bank has stripped