BENGALURU- Bank Indonesia will hold interest rates for a fifth month on Wednesday but cut in the second quarter of the year, according to a slim majority of economists in a Reuters poll, around the time the Federal Reserve is expected to begin its easing cycle.
With inflation within the target range of 1.5 percent to 3.5 percent since July and the economy showing signs of a slowdown, all 31 economists in the March 8-15 poll agreed the central bank’s next move would be a cut.
Governor Perry Warjiyo last month suggested that interest rates were unlikely to change until the second half of the year.
All the economists expected Bank Indonesia (BI) to keep its benchmark seven-day reverse repurchase rate at 6.00 percent at the conclusion of its March 19-20 meeting.
“We still expect BI to hold rates until the end of Q2. There’s no room for BI to cut until the Fed decides to make its first move,” said Irman Faiz, economist at Bank Danamon, adding that the policy rate has been weighing on Indonesia’s trade balance due to a depreciation in the rupiah.
