ING economists Deepali Bhargava, Lin Song and Min Ju Kang expect Bank Indonesia (BI) to take a tough stance at its upcoming meeting. They highlight recent Indonesian rupiah weakness, ongoing foreign exchange interventions and wide rate differentials compared to the United States. Currency stability is still the main priority, so he expects to increase the policy rate by 25 basis points this week.
Rupee weakness pushes BI towards tightening
“Much has changed since Bank Indonesia’s last monetary policy meeting, when BI left rates unchanged and refrained from signaling a more accommodative stance.”
“Since then, the IDR has declined by more than 1.5%, despite active BI intervention in the FX markets to control currency pressures.”
“At the same time, expectations for a Federal Reserve rate cut have changed amid favorable US macro data, further widening the rate gap adversely for IDRs.”
“Given the BI’s continued emphasis on currency stability, we expect the central bank to tighten its grip on Wednesday’s meeting and raise rates by 25bp.”
(This article was created with the help of an artificial intelligence tool and reviewed by an editor.)
