BENGALURU- Bank Indonesia (BI) will hold its key interest rate steady on Wednesday to support the rupiah, according to a narrow majority of economists in a Reuters poll, who decisively expected a rate cut on Dec. 18 just a month ago.
While domestic factors such as softening economic growth and cooling inflation were conducive for a rate cut, the rupiah’s near 6 percent drop against the dollar from a September peak was likely to give BI enough reason to pause.
The central bank is mandated to keep the currency stable.
Just over 50 percent of respondents, 17 of 31 in the Dec. 9-13 Reuters poll, predicted the central bank would keep its benchmark seven-day reverse repurchase rate at 6.00 percent on Wednesday.
“We expect BI to err on the side of caution and keep the benchmark rate on hold this month,” said Radhika Rao, senior economist and executive director at DBS Bank in Singapore.
“While inflation and growth developments tick the box for the BI to retain a dovish bent, weakness in the currency is a bigger bother for policymakers in the face of US driven uncertainties.”
