VIEW: ING Expects BI To Consider Easing In October

As was widely expected, BI kept rates at 5.75% for the seventh straight meeting. Its 2023 growth forecast was kept unchanged at 4.5-5.3%. ING believes that the decision to hold rates steady in July was “likely tied to BI’s focus on shoring up the rupiah, which has come under pressure of late.” Any easing is likely to be tied to IDR stability and ING expects “Governor Warjiyo to be very open to rate cuts by October”.

• “Warjiyo also pointed to possible slowing bank lending growth due to fading demand given elevated borrowing costs with the policy rate steady at 5.75%. BI now expects loan growth to settle between 9-11% YoY, down from its previous estimate of 10-12%.”
• “Governor Warjiyo said he expects the Fed to possibly hike rates in July and September, after which he expects Fed rates to “stabilise”. We doubt BI will resort to additional tightening just yet and believe the Bank will likely be on hold for at least two more meetings.”