ING: Pressure On IDR Prompts BI Hike

In light of Bank Indonesia’s hike ING write “with growth momentum apparently intact, BI felt it had the space to carry out “a pre-emptive and forward-looking move” to ensure that inflation remains manageable.”

• “It indicated that it would maintain “loose macroprudential policies” to provide some support after today’s rate hike. Bank lending remains robust (8.9% YoY as of September) with BI expecting this pace to accelerate to 9-11% YoY by next year.“
• “Today’s move will likely provide some relief for the IDR by taking the still-narrow interest rate differential to 50bp over the Fed.”
• “We believe that Bank Indonesia will remain open to further tightening should the Fed carry out a hike of its own, with IDR stability set to remain a likely decision point for the rest of the year.”