BENGALURU- Bank Indonesia will keep its key policy rate unchanged at a Feb. 20-21 meeting over subdued inflation and an improving outlook for the currency, according to a Reuters poll of economists who predicted the first rate cut to come next quarter.
Indonesia’s inflation rate has stayed within the central bank’s 1.5 percent -3.5 percent target range since July, suggesting cumulative rate hikes of 250 basis points were working.
The rupiah although down 1.4 percent against the dollar this year has performed better than many of its peers.
With inflation under control, the central bank has room to leave its policy unchanged in the near-term.
All 30 economists in the Feb. 12-16 poll expected Bank Indonesia (BI) to hold its benchmark seven-day reverse repurchase rate at 6.00 percent on Wednesday.
Median forecasts showed interest rates staying on hold until at least end-March, followed by a 25 basis-point cut in each quarter to end the year at 5.25 percent .
That was in line with the US Federal Reserve’s expectations for 75 bps of cuts to its fed funds rate this year.
“We retain our forecast of the first rate cut by BI during the June meeting after the Fed makes its first rate cut announcement in May. We continue to maintain that BI policy decision is mainly influenced by the Fed actions and any delay by the Fed might delay BI rate action,” said Kunal Kundu, economist at SocieteGenerale. -Reuters
