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MNI Bank Indonesia Preview - November 2023: IDR Stabilises, Rates On Hold

EXECUTIVE SUMMARY:

  • Bank Indonesia (BI) unexpectedly hiked rates 25bp to 6% in October to defend the rupiah and since then we have seen some FX stabilisation and IDR appreciation versus the dollar. As a result, BI is likely to keep rates on hold at its November 23 meeting but continue to sound wary regarding the impact of “global uncertainty” on the currency.
  • USDIDR is 2% lower since the 19 October meeting and -3.1% since the end of October, back to levels not seen since the end of September. The rupiah has also strengthened against a basket of currencies. One of the reasons given for hiking in October was to “mitigate the impact of imported inflation”. Imported deflation eased recent months in line with the weaker rupiah.
  • While BI has a number of existing and new instruments to ensure FX stability, given recent currency depreciation it is unlikely to want to risk destabilising the IDR by easing monetary policy ahead of the Fed. So rates are also likely to be “high for longer” in Indonesia.

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BI Preview - November 2023.pdf

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