ANZ analysts note that the Bank Indonesia (BI) kept its 7-day reverse repo rate unchanged at 6.00% today, but cut banks’ reserve requirement ratio (RRR) by 50bps.
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“The RRR cut is welcome, given that liquidity conditions have tightened. It’s worth noting that BI last cut its RRR in December 2015 and March 2016, while the policy rate was lowered multiple times starting January 2016.”
“Accordingly, cuts to BI’s policy rate seem to be, in BI Governor’s Perry Warjiyo’s words, a “matter of timing.” BI may be keen to wait for more clarity post G20 and on whether the US Fed would lower its policy rate before finally pulling the trigger.”
“The upshot is that we are maintaining our view for 75bps worth of rate cuts by BI over the next one year, with the first potentially materialising in July.”
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