MNI Bank Indonesia Preview – September 2023: BI Holds, IDR Stability The Focus

EXECUTIVE SUMMARY:

• Bank Indonesia (BI) is unanimously expected to keep rates at 5.75%, including MNI, at its September 21 meeting where it has been since the last hike in January. With inflation back within the 2% to 4% target band, the focus is firmly on FX stability.
• Following the August meeting the BI Governor reiterated the IDR could be managed with other tools apart from the policy rate. These include intervention and FX term deposits for export earnings which are now increasingly being used. This month it also introduced BI IDR securities or SRBI, which is a new instrument to replace Operation Twist and the 6,9 and 12-month reverse repo operation.
• BI is on an extended pause. There is a lot of discussion on when rates will be cut but that is likely to require a clear end to Fed tightening and to dollar appreciation versus the rupiah. BI is unlikely to want to begin easing while there is a risk that the Fed could tighten further and thus rate cuts have likely been postponed until 2024.

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BI Preview - September 2023.pdf