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MNI Bank Indonesia Preview - January 2023: Inflation Means Another 25bp

EXECUTIVE SUMMARY

  • Bank Indonesia is likely to hike rates another 25bp to 5.75% at its January 19 meeting due to continued price pressures and need to defend the currency. If the Fed hikes by 25bp, as expected, at its February meeting, then this would keep the rate differential unchanged and aid FX stabilisation.
  • Some analysts are expecting BI to pause in January but with both headline and underlying inflation edging up in December and BI reiterating that it will respond to ensure that core remains under the upper end of its target band, another rate increase is likely this month. FX stability and ensuring continued foreign inflows are also a BI priority and while the IDR has appreciated somewhat since the last meeting, further support is likely from the central bank.
  • Another 25bp is certainly possible in February given BI expectations that inflation pressures will remain elevated in H1 2023 and the need to attract foreign inflows. But given more dovish Fed expectations and lower commodity prices, BI is likely close to its terminal rate.

For the full piece, see here.

Asia Bank - PreviewHomepageBank of Indonesia - PreviewEM Central Bank ReportsEM Central Bank PreviewEmerging Market News

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