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MNI BI Preview – January 2022: Tightening Draws Nearer But BI Are Not There Yet

EXECUTIVE SUMMARY

  • The prospect of an earlier, more aggressive policy tightening by the Fed may eventually force Bank Indonesia's hand, even as they pledged not to hike interest rates until there are signs of a fundamental increase in inflation, which in December remained below the target range.
  • Indonesian policymakers are not quite ready to raise interest rates yet and the consensus view (with analysts virtually unanimous) is that the 7-Day Reverse Repo Rate will stay at its all-time low come the end of this week's meeting.
  • Nonetheless, the Bank's rhetoric on risks to the policy outlook will be closely scrutinised for any hints on the timeline of tightening expected to commence later this year.

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