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VIEW: ANZ Sees Risk Of Hike If Q2 USDIDR Exceeds 16200

INDONESIA CENTRAL BANK
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Bank Indonesia (BI) hiked rates 25bp to 6.25% at its April 24 meeting which ANZ notes coincided with its change in Fed view as macro projections were unchanged. It says that further hikes can’t be ruled out and that “any material overshoot” of BI’s Q2 USDIDR forecast of 16,200 increases the chance of another hike. ANZ also believes that “US Fed cuts are a prerequisite for BI to reverse course”.

  • “We cannot rule out further hikes given the still-elevated external uncertainties (particularly in terms of fed policy rate trajectory) and Indonesia’s narrowing trade surplus that has left the overall balance of payments position more vulnerable to shifts in global risk sentiment. The IDR trajectory will be key to watch. BI expects the USD/IDR to stabilise at 16,200 in Q2, and any material overshoot will raise the odds of another hike, in our view.”
  • “Notably, unlike the previous meeting when the governor signalled scope for rate cuts to be considered in H2 2024, there was no mention about potential monetary easing during BI’s press conference today. We have been of the view that BI will have to wait for the US Fed pivot before it can follow suit. If the Fed starts to ease in December as BI currently expects, then BI’s own pivot may have to wait until 2025.”
  • “BI is set to further loosen macroprudential policies to support growth, despite robust credit expansion of 12.4% y/y in Q1 2024. BI has offered liquidity incentives (such as cuts in reserve requirement ratios) to encourage banks to lend to priority sectors, and this list of eligible sectors will be expanded starting 1 June 2024.”
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Bank Indonesia (BI) hiked rates 25bp to 6.25% at its April 24 meeting which ANZ notes coincided with its change in Fed view as macro projections were unchanged. It says that further hikes can’t be ruled out and that “any material overshoot” of BI’s Q2 USDIDR forecast of 16,200 increases the chance of another hike. ANZ also believes that “US Fed cuts are a prerequisite for BI to reverse course”.

  • “We cannot rule out further hikes given the still-elevated external uncertainties (particularly in terms of fed policy rate trajectory) and Indonesia’s narrowing trade surplus that has left the overall balance of payments position more vulnerable to shifts in global risk sentiment. The IDR trajectory will be key to watch. BI expects the USD/IDR to stabilise at 16,200 in Q2, and any material overshoot will raise the odds of another hike, in our view.”
  • “Notably, unlike the previous meeting when the governor signalled scope for rate cuts to be considered in H2 2024, there was no mention about potential monetary easing during BI’s press conference today. We have been of the view that BI will have to wait for the US Fed pivot before it can follow suit. If the Fed starts to ease in December as BI currently expects, then BI’s own pivot may have to wait until 2025.”
  • “BI is set to further loosen macroprudential policies to support growth, despite robust credit expansion of 12.4% y/y in Q1 2024. BI has offered liquidity incentives (such as cuts in reserve requirement ratios) to encourage banks to lend to priority sectors, and this list of eligible sectors will be expanded starting 1 June 2024.”