Sell-Side Views On Bank Indonesia

Some sell-side views post yesterday's BI decision, with rates expected to be left on hold.

Goldman Sachs: "As headline inflation and the dollar have likely peaked, with the Fed slowing its hiking pace, and policymakers continuing to signal that policy settings have been tightened enough, we continue to expect no further policy rate hikes by Bank Indonesia in coming months. However, should the dollar rise significantly again and the IDR weaken in coming months, the risks to our forecasts would be skewed in a more hawkish direction vs. our new baseline forecast path."

J.P. Morgan: "Bank Indonesia kept its policy rate unchanged at 5.75% as expected. In the accompanying statement, Bank Indonesia penciled in 2023 GDP growth of 4.5-5.3%oya (JPMorgan: 3.1%), a current account deficit of 0.4 to -0.4% of GDP (JPMorgan: -0.4% of GDP) and that headline inflation will fall back to within the 2-4%oya target range in 2H23. We broadly concur with these forecasts and would suggest that the BI rate will remain at 5.75% through this year, notwithstanding a global recession."

ANZ: "Overall, we maintain our call for no change to BI’s policy rate for the rest of the year. We concur with the central bank’s view that domestic growth and inflation dynamics do not warrant further hikes. That said, there is no strong case for rate cuts either. As BI noted, bank lending rates are still conducive to the recovery amid ample liquidity. Global uncertainty, including the magnitude and duration of the US rate-hike cycle, also increases the impetus for a cautious approach; our house forecast for the fed funds rate (FFR) has recently been raised by 50bps to 5.25-5.50% amid stronger-than-anticipated economic momentum in the US, and we do not expect an easing pivot until 2024."