MNI Bank Indonesia Preview – June 2024: Hawkish Hold, Hike Risk

EXECUTIVE SUMMARY:

• Bank Indonesia (BI) is widely expected to leave rates at 6.25% at its meeting on June 20 but given that the rupiah has weakened further since the May meeting, there is a risk that it decides to hike again to defend the currency as it did in April and last October.
• CPI inflation remains well within the 1.5-3.5% target band and BI is likely to reiterate its confidence that it will stay there. The main concern is the weaker currency boosting imported inflation.
• FX stability remains a concern and BI has continued to intervene to support the currency since its last meeting. USDIDR is up 2.3% since the May 22 meeting and 1% since the April rate hike. The move has not just been driven by a stronger US dollar but also concerns over Indonesia's fiscal outlook.
• While BI is working to contain IDR depreciation, rate cuts are off the table and probably won’t be considered until it is clear the Fed will ease and when it will start.

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BI Preview - June 2024.pdf