Despite recent IDR weakness, Bank Indonesia (BI) opted to keep its policy rate on hold at 3.50%. Until clear signs of a hawkish shift emerge, the IDR is likely to be relatively more vulnerable to shifts in global sentiment, in the view of economists at ANZ Bank.

Bank Indonesia bucks the hawkish trend

“While there were some signs suggesting that the central bankis turning more vigilant on inflation risks, the overall policy messaging remained dovish.”

“We have been of the view that pandemic-era stimulus is no longer needed in Indonesia and that the scope for BI to swim against the global tide of rate hikes is narrowing. But until clear signs of a hawkish shift by the central bank emerge, the IDR is likely to be more vulnerable to swings in global risk sentiment.”