Indonesia to maintain key rate at 6.00% until at least mid-2024
BANK Indonesia (BI) will leave its key policy rate unchanged at 6.00 per cent on Thursday and likely keep it at that level until at least mid-2024, according to a Reuters poll of economists in which a few respondents still expected another rate hike.
Despite inflation inching up to 2.56 per cent in October from 2.28 per cent in September, it was still within the central bank’s 2 to 4 per cent target range for the year, suggesting price pressures were less of a concern in South-east Asia’s largest economy.
Indeed, Bank Indonesia‘s surprise 25-basis-point rate hike on Oct 19 was aimed at propping up the rupiah, which had been down around 8 per cent against the dollar since May.
The currency has since gained nearly 2 per cent against the greenback and was trading around 15,540/US$ on Monday. Expectations the US Federal Reserve was done with hiking rates also boosted the rupiah and other Asian currencies.
“Bank Indonesia is likely to keep rates unchanged this month. Rupiah stability was the driving factor behind the unexpected move last month, and since then market pressures have eased with the US dollar and yields pulling back post the US Fed’s pause,” said Radhika Rao, senior economist at DBS bank.
In a Nov 14-20 Reuters poll, a strong majority of economists, 27 of 31, expected Indonesia‘s central bank to keep its benchmark key interest rate unchanged at 6.00 per cent on Thursday. The remaining four predicted a quarter-percentage-point hike to 6.25 per cent.
Despite median forecasts showing no change to interest rates at least until the end of the second quarter of 2024, there was a plurality of views among economists on the key rate.
While 12 of 28 put the key rate at 6.00 per cent at the end of June, five had a 6.25 per cent forecast and three had 6.50 per cent. The remaining eight predicted at least a quarter-percentage-point cut by then.
“Our base case is for the first BI rate cut in Q3 2024 ... Nonetheless, the timing and duration will be data-dependent; BI is likely watching incoming data and the Fed closely to decide its next move,” said Brian Lee Shun Rong, economist at Maybank. REUTERS
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