Sell-Side Views Post BI - Risk Of Cuts in H2

Several banks see risks of BI cuts for the second half of this year, after yesterday's as expected on hold BI outcome.

Goldman Sachs: "Given declining headline inflation, weaker US dollar sentiment, the stable IDR and a potential end to the Fed tightening cycle in sight, we continue to expect no further policy rate hikes by Bank Indonesia in coming months. The next scheduled BI meeting is on May 17-18, 2023."

J.P. Morgan: "In the accompanying statement, Bank Indonesia maintained its current account balance forecast of between 0.4 to -0.4% of GDP (J.P. Morgan: -0.4% of GDP) and expects that the 2023 balance of payments will record a surplus reflecting capital inflows. BI also expects that headline inflation will fall back to the 2-4%oya target range likely earlier than expected with J.P. Morgan penciling in a return to within the range by June compared to BI’s expectation of August from September previously. We concur with these forecasts and would suggest that the BI rate will remain at 5.75% through this year, though the risk bias is for easing."

Citi: "Headline inflation is forecasted to return to the 2-4% band earlier than expected, will growth expectations near the upper bound to the 4.5%-5.3% range. With inflation easing and growth stable, Citi Economics' rate cut expectations seems intact with BI's guidance reinforcing their call - Citi Economics had called for three 25bps cuts from September to November, and another cut in January 2024. The USDIDR move was primarily factor of USD sentiment and upcoming holidays (April 19-25) - for resistance we are watching 14970 (April 6 high), while support is likely first at 14645."