Mitul Kotecha, Senior Emerging Markets Strategist at TD Securities, notes that Bank Indonesia left its policy (7 day reverse repo) rate unchanged as expected at 5.25% and maintained a “hawkish” stance.
Key Quotes
“BI stated they will maintain front loaded, pre-emptive policy, utilising their dual market intervention mechanism.”
“BI also stands ready to stabilise IDR. However, IDR weakened following the rate decision, hitting its lowest level versus USD since Oct 15.”
“We expect losses to be contained but much depends external factors, as CNH continues to lead Asian currencies lower.”
“BI feels that the current policy rate is sufficient to attract capital flows and stem fund outflows.”
“The proximity of elections next year is likely to limit the scope for hikes further out.”
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