BI Keeps Benchmark Rate Steady, Sees Inflation Rising Above 4% Upper Tolerance Band in 2022

• Bank of Indonesia (BI) decided to keep its benchmark rate (7D Reverse Repo) unchanged at 3.5% this morning, in line with expectations, despite the rise in inflationary pressures.
• We have seen that a rising number of central banks in Asia /SE Asia have adopted a more hawkish stance in 2022 with inflation breaking above the upper tolerance band in many economies.
• BI sees rising economic uncertainty due to global slowdown and elevated inflationary pressures.
• BI expects CPI to continue to rise in the near to medium term, breaching the 2%-4% target this year before returning back within target in 2023.
• The chart shows that Indonesia CPI has been rising in recent months, up from 2% in January to 3.6% in May.
• BI sees domestic economic recovery continuing despite global uncertainty, expecting GDP growth to be at 4.5%-5.3% this year.
• IDR remains under pressure in the near term; USDIDR broke above its key resistance at 14,745 last week, which corresponds to the 61.8% Fibo retracement of the 13,583 – 16,625 range.
  • Next key resistance to watch on the topside stands at 15,000.
• On the downside, support to watch below 14,745 stands at 14,538 (50DMA).

Source: Bloomberg/MNI