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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
INDONESIA
Bank Indonesia (BI) meets today and while it is expected to keep rates at 6.25%, there is a material risk of a hike given that USDIDR is rising again and is currently around 16414, close to the June 14 high and up 2.6% since the May 22 meeting. This is likely to keep BI sounding hawkish and focussed on FX stability (see MNI BI Preview June 2024).
- While inflation is firmly within BI’s 1.5-3.5% target band, BI is concerned that the weak rupiah will increase inflation through the import channel. This is well founded as respondents in the May S&P Global manufacturing PMI survey observed that the softer currency is adding to their cost pressures, although they are struggling to pass them on in full.
- Import prices were disinflationary between November 2022 and February 2024. At their trough in July last year, they were down 11.4% y/y. This changed in March this year when they became positive and in April they picked up to 3.7% y/y.
- This upward trend in imported inflation looks likely to continue given its close correlation with the NEER which has weakened substantially in recent months. The JP Morgan NEER fell 0.3% m/m in May and 1.3% in June and is now down 5.3% y/y. Fiscal worries have been weighing on the rupiah.
Indonesia import prices vs IDR
Source: MNI - Market News/Refinitiv
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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