Mitul Kotecha, senior emerging markets strategist at TD Securities, expects Bank Indonesia to maintain its 7-day reverse repo rate at 5.00%.
Key Quotes
“We think the decision is a closer call than initially appears in consensus forecasts, with only 3 out of 26 analysts expecting another rate cut from BI. A downside inflation surprise in November and firmer IDR need to be weighed against an increased emphasis on macroprudential measures, which we think will allow BI to be patient, waiting until early next year to ease policy again.”
“At the last meeting in November BI left its policy rate unchanged but lowered minimum reserve requirements for conventional commercial banks and Islamic banks/business units by 50bps to 5.5% and 4%, respectively. This suggested a shift in emphasis from policy rate cuts to greater provision of liquidity to the banking system and transmission of “the accommodative policy mix”, alongside macroprudential measures in conjunction with the government.”
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