Bank Indonesia to stay put till year-end, cut in Q2 2024: poll
BANK Indonesia (BI) will follow its regional peers and leave its interest rate unchanged on Oct 19, staying on the sidelines for longer than previously expected, a Reuters poll found.
With inflation at a 19-month low of 2.28 per cent in September, firmly within BI’s 2 per cent to 4 per cent target range, all 36 economists in the Oct 10-16 Reuters poll said the central bank would leave its seven-day reverse repurchase rate at 5.75 per cent on Thursday (Oct 19) for the ninth consecutive meeting.
However, a weakening rupiah – down around 7.5 per cent from a 2023 high of 14,560 per US dollar hit on May 4 – was likely to keep the central bank from easing anytime soon.
Earlier this month, the central bank intervened in the foreign exchange market and bought government bonds to stabilise the rupiah.
“BI, along with most global central banks, is just going to try and wait out the volatility we have seen in global markets recently, particularly in the US Treasury markets,” said Lavanya Venkateswaran, senior Asean economist at OCBC Bank.
“More so because the currency has been under some pressure and there has been a relative underperformance compared to regional peers in the last week or so.”
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While nearly 80 per cent of economists, 23 of 29, predicted BI would keep rates at 5.75 per cent for the year, median forecasts showed the first 25 basis point cut to come in Q2 2024.
Just a month ago, the consensus was for policy easing to start in Q1 2024.
“We only expect BI to cut rates if there has been a clear signal/forward guidance from the Fed that it would begin to ease policy. This may not happen until around Q2 next year or later,” wrote Barra Kukuh Mamia, senior economist at Bank Central Asia.
Indonesia’s economy is forecast to expand 5.0 per cent this year, down from 5.3 per cent in 2022, but within the BI’s growth target range of 4.5 per cent to 5.3 per cent. It is expected to again grow 5.0 per cent in 2024. REUTERS
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