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Indonesia should manage central bank messages to keep investors' faith: S&P

[BENGALURU] The credibility of Indonesia's central bank with investors remains intact following parliamentary proposals to overhaul its mandate, but the changes must be carefully handled to prevent any pressure on its sovereign rating, S&P Global said on Friday.

"The communication and implementation of policy changes will be important determinants of BI's credibility going forward," Andrew Wood, the agency's sovereign debt analyst for the country, told Reuters.

"If investor confidence in Indonesia's monetary policy framework is negatively affected, it could give rise to financial market implications, potentially weakening monetary flexibility and sovereign rating support." Indonesian bonds, the rupiah and stocks have all been pressured this month on the back of recommendations made to the government that include giving ministers more influence in Bank Indonesia's (BI) policymaking.

In a bid to settle nerves after a series of interventions to support the currency, the bank on Thursday kept interest rates on hold and stressed both President Joko Widodo and Finance Minister Sri Mulyani Indrawati had pledged policy would remain independent.

REUTERS

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