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Bank Indonesia could cut its benchmark interest rate Thursday, as policymakers respond to stagnant inflation worries. The bank has held its seven-day reverse repo rate steady at 3.75% since November, but concerns over the impact of a resurgent pandemic could prompt a further 25 basis point cut.
Reacting to the fall-out from the global crisis, Bank Indonesia cut rates by a total 125 basis points over the course of 2020.
Source: Bloomberg
Indonesia's core inflation rate stood at 1.6% in December, well below the central bank's target of between 3% and 5% agreed with the Ministry of Finance earlier in February. Central bank Governor Perry Warjiyo told a January press conference that inflation was unlikely before Q4 and even then monetary policy would remain easy, with the central bank likely to mop up excess liquidity to start any unwind process .
The bank is also buying government bonds on the primary market, but Warjiyo said the pace of buying may slow this year. Around USD1.85 billion in bonds have been purchased so far in 2021 in addition to the USD50 billion purchased through 2020.
MIXED DATA
BI is forecasting economic growth of between 4.8% and 5.8% this year, a rebound from a 2% contraction seen last year. Q4 growth came in lower than expected at -0.4% against a forecast of 0.7%.
The rupiah slumped to 14860 to the USD in September but has since recovered to 13970 this week, boosted by a better than expected trade surplus.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.