Goldman Sachs See BI On Hold But With Upside Risks

Post yesterday's on hold outcome from BI, the US bank expects the central bank to remain steady into year end, but further hikes can't be ruled out if USD/IDR rises sharply again.

Goldman Sachs: "In the Q&A session, asked about potential rate hike in the upcoming meetings, the Governor noted that uncertainty has eased and probability of Fed hiking is lower. He reiterated that the central bank will continue to be data dependent going forward in deciding the rates. The monetary board also shared an update on the new IDR securities (SRBI), they mentioned around 30% of the issued securities (~IDR 50tn) is now traded in the secondary market with around half (~IDR 27tn) currently owned by foreign investors.

Lastly, asked about risk to inflation from the recent increase in the minimum wage across provinces, the monetary board noted that a 5% increase in minimum wage will only increase headline inflation by ~0.04pp, hence not a significant concern.

Going forward, we continue to expect Bank Indonesia to keep the policy rate on hold till the end of this year. We still think the risks are skewed towards additional rate hikes at upcoming meetings should USDIDR rise sharply again. The next monetary board meeting is scheduled on December 20-21."