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INDONESIA: VIEW: Goldman Sachs Forecasting 25bp Rate Cuts In Q1 & Q2 2025

INDONESIA

Bank Indonesia left rates at 6.0%, in line with consensus although 13 out of 31 analysts on Bloomberg forecasted a 25bp rate cut. Goldman Sachs continues to expect 25bp rate cuts in Q1 and Q2 next year with the policy rate at 5.5% by mid-2025 with risks skewed “towards a more prolonged pause by BI, especially if the IDR remains under pressure amid still high global financial uncertainty and larger-than-expected impact from the 1pp value-add tax (VAT) hike”.

  • Goldmans observed that “in the Q&A session, the Governor noted that the timing is "not right yet" to ease the policy rate given the high global uncertainty (including US-China trade tensions), potentially more hawkish US Fed and higher US Treasury yields in 2025.”
  • USDIDR is up 1.2% today to 16280 following a more hawkish Fed, increasing the chance of intervention.
  • “The central bank will continue to focus on currency stability until there is more certainty. BI is committed to keeping the IDR stable through greater intervention and higher SRBI yields.”
  • “The Governor also shared that the BI has reached an in principle agreement with the finance ministry to buy bonds in the secondary market in 2025, up to IDR 150tn, which is larger than the expected maturity of the bonds under BI-MOF "burden sharing".”
  • “On the economic front, BI maintained its key domestic economic projections; real GDP growth at 4.7-5.5% in 2024 and 4.8%-5.6% in 2025 (GSe: 5.0%/4.9% in 2024/25), headline CPI inflation within the central bank inflation target band of 1.5%-3.5% in 2024 and 2025 (GSe: 2.3%/2.6% in 2024/25).”
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Bank Indonesia left rates at 6.0%, in line with consensus although 13 out of 31 analysts on Bloomberg forecasted a 25bp rate cut. Goldman Sachs continues to expect 25bp rate cuts in Q1 and Q2 next year with the policy rate at 5.5% by mid-2025 with risks skewed “towards a more prolonged pause by BI, especially if the IDR remains under pressure amid still high global financial uncertainty and larger-than-expected impact from the 1pp value-add tax (VAT) hike”.

  • Goldmans observed that “in the Q&A session, the Governor noted that the timing is "not right yet" to ease the policy rate given the high global uncertainty (including US-China trade tensions), potentially more hawkish US Fed and higher US Treasury yields in 2025.”
  • USDIDR is up 1.2% today to 16280 following a more hawkish Fed, increasing the chance of intervention.
  • “The central bank will continue to focus on currency stability until there is more certainty. BI is committed to keeping the IDR stable through greater intervention and higher SRBI yields.”
  • “The Governor also shared that the BI has reached an in principle agreement with the finance ministry to buy bonds in the secondary market in 2025, up to IDR 150tn, which is larger than the expected maturity of the bonds under BI-MOF "burden sharing".”
  • “On the economic front, BI maintained its key domestic economic projections; real GDP growth at 4.7-5.5% in 2024 and 4.8%-5.6% in 2025 (GSe: 5.0%/4.9% in 2024/25), headline CPI inflation within the central bank inflation target band of 1.5%-3.5% in 2024 and 2025 (GSe: 2.3%/2.6% in 2024/25).”