Free Trial
OIL

WTI Option Expiry – Wed 16th November 22

US BONDS

BNY Mellon See Fed Pricing as Gone Too Far

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access
MNI (Sydney)
SYDNEY (MNI)

Indonesia’s central bank remains “vigilant” against inflation and currency volatility, but it is still unconvinced that hiking its benchmark interest rate would have a significant impact on either factor in current markets.

Bank Indonesia on Thursday left its seven day reverse repo unchanged at the record low of 3.5% as the rupiah fell through the 15,000 barrier against the USD for the first time since 2020, (See: MNI BRIEF: Rupiah Falls Below Key Level As Bank Indonesia Holds).

While it was widely expected that rates would be held, BI was seen as being under rising pressure to hike and there were expectations of more hawkish commentary from the central bank, (See: MNI STATE OF PLAY: Pressure On Indonesian CB To Hike Rates).

GOVERNOR REMARKS

In a press conference after the decision, however, BI Governor Perry Warjiyo said he believed the rupiah should be strengthening due to Indonesia’s strong export performance and a current account surplus and blamed the weakness of the currency on global factors.

The rupiah is down 4.9% so far this year, but BI points out that this is less than the falls in neighbouring countries such as Malaysia, India, and Thailand. BI has noted that the Malaysian currency has dropped by more than 6% this year, even though Bank Negara Malaysia has hiked rates, (See: MNI INSIGHT: Stable Ringgit Key As Malaysia CenBank Tightens).

The bank says that measures such as increasing money market interest rates and intervening in financial markets will help stabilise the currency.

INFLATION

BI’s fight against inflation has been helped by subsidies from the Indonesian government, worth around US$23 billion, and CPI inflation is at 4.35% as of May, just outside the 2% to 4% target range.

Core inflation, however, is more moderate and “manageable” at 2.63% and a sign that inflation expectations are under control.

Instead of pointing to an interest rate hike ahead, BI is now emphasising its commitment to other measures which would normalise monetary policy, such as the gradual increase in the statutory reserve requirements for commercial banks, which has so far soaked up around US$14.6 billion in liquidity.

MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com

To read the full story

Why Subscribe to

MarketNews.com

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.