BENGALURU- Bank Indonesia will hold interest rates steady on Wednesday to protect the rupiah from further depreciation amid growing global trade tensions, but is expected to cut them next quarter to prop up economic growth, a Reuters poll found.
Although Southeast Asia’s largest economy grew just over 5 percent in 2024 – broadly mirroring the previous year’s pace – it marked the slowest expansion in three years and was far below President Prabowo Subianto’s 8 percent target.
Last month, BI Governor Perry Warjiyo acknowledged the need to spur growth. However, with the rupiah down about 2 percent so far this year despite regular forex intervention, the central bank – mandated to keep the currency stable – is unlikely to shift its focus to growth at this meeting.
More than 60 percent of economists, 19 of 31, in the March 10–17 Reuters poll predicted the central bank would keep its benchmark seven-day reverse repurchase rate at 5.75 percent on Wednesday. The remaining 12 respondents expected BI to cut rates by 25 basis points.
The overnight deposit and lending facility rates were also expected to remain at 5.00 percent and 6.50 percent, respectively.
“Similar to the February meeting, conditions for a cut… are not favorable. There has been renewed weakness in the rupiah. … Against this challenging backdrop, we think that BI will wait it out for the next rate cut,” said Sanjay Mathur, chief economist for Southeast Asia and India at ANZ. “As such, the rate-cutting cycle remains intact, but the timing of each rate cut would depend on FX stability.”
