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According to the latest note published by the HSBC Analysts, Bank Indonesia (BI) is likely to extend the coronavirus support measures by reducing the key interest rate at its monetary policy meeting due later this week.

Key quotes

“Given BI’s growing programme of outright bond purchases, we believe BI should maintain a cautious policy stance.

That said, with growth undershooting BI’s estimate in 1Q and signs of an accelerating spread of COVID-19 domestically, the central bank will be under pressure to deliver some support for the economy.

We expect BI to deliver a 25bp cut in 2Q, likely in the 20 May meeting, followed by a 25bp reduction in 3Q vs. the previous expectations of 50bps cuts in 2Q.

We continue to see a further 100bp reduction in the IDR Reserve Requirement Ratio as BI endeavors to use all measures to facilitate the financing of a larger budget deficit.”

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