BENGALURU- Bank Indonesia (BI) will keep its key interest rate unchanged at 5.75 percent next week and leave it there for the rest of the year as inflation is set to remain within the central bank’s 2-4 percent target range, a Reuters poll of economists found.
Headline inflation in Southeast Asia’s largest economy eased to a 14-month low of 3.52 percent in June and core inflation to 2.58 percent, suggesting BI can hold rates steady, despite expectations policymakers in the US , Britain and the euro zone will hike interest rates further.
With inflation expected to stay within the central bank’s 2 percent-4 percent target range the focus was now on maintaining the stability of the Indonesian rupiah
The currency is up about 4 percent for the year against the dollar but has come under pressure after recent hawkish comments by Fed officials pointing to more US rate hikes, suggesting BI would remain cautious in its monetary policy.
All 31 economists in the July 14-19 Reuters poll expected Indonesia’s central bank to hold its key seven-day reverse repurchase rate at 5.75 percent at the conclusion of its July 24-25 meeting.
A strong majority of economists, 20 of 28, forecast BI to hold the benchmark policy rate at that level for the rest of the year, with only eight expecting a rate cut of at least 25 basis points by then. – Reuters
