Barclays on BI & IDR

"BI Governor Perry Warjiyo reiterated that the current policy rate of 5.75% was sufficient to keep core inflation within the 2-4% range. Mr Perry noted that CPI inflation, both on a headline and core basis, had surprised to the downside relative to the central bank's projections. BI also expects headline inflation to return to the 2-4% range in H2 from 5.3% y/y as of January 2023. We expect no more policy rate hikes this year.

Specifically on the export earnings policy, BI will offer a new FX term deposit instrument from 1 March for banks and other participating institutions to park exporters' proceeds in the 1-, 3- and 6-month tenors. To encourage participation in the policy, BI will not only reward exporters with better rates if they increase the size or tenor of the deposits – agent banks and participating institutions will also receive better fees to incentivise them to seek larger and longer deposits.

In response to questions on whether BI will require exporters to convert their proceeds to IDR, Mr Perry noted that there were both costs and benefits to such a rule, which he revealed is still being discussed and will be announced when the time is right."