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Analysts at TD Securities offer a detailed preview of what to expect from Bank Indonesia’s (BI) monetary policy decision due to be announced this Thursday.

Key Quotes:

“We expect Bank Indonesia to keep policy on hold at its meeting on Thursday 21st November, with the 7-day Reverse Repo likely to be kept on hold at 5.0% following a “pre-emptive” easing at the last meeting in October.

However, we expect BI to maintain an accommodative stance, highlighting that this is a pause after a total of 100bp of cuts, rather than a halt to easing.

Pressure on the economy has continued to remain in place, with Indonesia’s manufacturing PMI moving further into contraction territory in October, while consumer confidence declined.

Inflation has remained well behaved, with both headline and core measures falling in October, the former to a lower than expected reading of 3.13% y/y and the latter to 3.20% y/y, below the mid point of Bank Indonesia’s 3.5% +/- 1% target band.

We expect a gradual uptick in inflation in the months ahead, but not to a degree that should prevent further easing in Q1. A relatively stable IDR will also likely give confidence for BI to lower rates further.

We expect two more rate cuts in this cycle but think BI will slow the pace of rate cuts, with the 7 day reverse repo likely to fall to 4.5% by end Q1 2020.”

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