Economist at UOB Group Enrico Tanuwidjaja comments on the latest decision on interest rates by the Bank Indonesia (BI).

Key Takeaways

“Bank Indonesia (BI) kept its benchmark policy rate (7-Day Reverse Repo) unchanged at 5.75% following its May MPC meeting, in line with consensus and our expectations.”

“BI remains of the view that inflation expectations are ‘well-anchored’ and it expects headline inflation to return to BI’s target range of 2-4% by 3Q23. Stronger rupiah has supported, keeping imported inflation pressures at bay.”

“Today’s MPC decision also signalled that BI is not too defensive about possibility of rate cuts. In our view, the key catalysts for the start of the rate cutting cycle would be a consistently declining inflation towards its target range, a more anchored and persistent stability of the rupiah, and an increasing need to support the growth momentum ahead. We keep our view for the rate cut cycle to start in 1Q24.”