Bank Indonesia To Stand Pat, Focus On Inflation Comments

Bank Indonesia is expected to keep the 7-Day Reverse Repo Rate unchanged at 3.50% today.

• In a recent address, Governor Warjiyo expressed readiness to look through temporary CPI volatility and pointed to the central bank's focus on fundamental inflationary pressures.
• A few weeks earlier, he told lawmakers that Bank Indonesia can be patient with tightening policy despite the spectre of higher energy prices, with policymakers looking to ensure sustainable economic recovery.
• Indonesia's consumer price growth accelerated in March, but both headline and underlying inflation stayed comfortably within the central bank's target range (+2.0%-4.0% Y/Y).
• Nonetheless, Deputy Governor Warjiyo said recently that inflation may approach the upper limit of the target range this year. The impact of Ramadan, VAT hike and fuel subsidies expiry will be eyed in the next batch of CPI data.
• On the flip side of BI's dual price stability mandate, the rupiah has remained stable over the recent weeks even as hawkish Fed bets have been building up.
• This turns the focus to Bank Indonesia's rhetoric on inflation. Any updates on policymakers' view on "fundamental inflationary pressure" will provide interest, with analysts trying to predict the timing of BI's policy exit.
• All economists surveyed by Bloomberg forecast no change to the benchmark policy rate.