VIEW: ANZ Sees BI Delaying Easing If Fed Delayed Too

Bank Indonesia (BI) left rates at 6% as expected but also its message was unchanged - it remains focussed on price and currency stability. Its forecasts were also left unaltered at 4.7-5.5% for growth, current account at -0.1 to -0.9% of GDP, inflation within the 1.5-3.5% band and loan growth of 10-12%, but global growth was revised up 0.2pp to 3.0% due to the US and India. ANZ hasn’t changed its expectations of the first rate cut likely in Q3 following the Fed.

• “BI expects the IDR to strengthen once there is certainty on US Fed cuts. It reiterated the potential scope for lowering rates in H2 2024, when it expects the US Fed to kick off its easing cycle.”
• “We remain of the view that there is little urgency for a quick BI policy pivot, given robust loan growth and heightened uncertainty surrounding the timing of the US Fed’s first cut. Our base case is for BI to follow suit once the Fed kicks off its easing cycle, likely in Q3 2024. The recent run of stronger-than-anticipated US data has raised the risk that the US Fed’s pivot may be delayed; in which case, we would expect BI to be patient too.”
• “The accompanying monetary policy statement reiterated BI’s policy focus on strengthening rupiah stability through its stabilisation measures.”