Analysts at TDS expect the Bank Indonesia to leave the benchmark 7-day reverse repo rate unchanged at 4.25%, in line with the unanimous consensus.
“This decision is likely despite recent softness in CPI (3.25% Y/Y in January vs the 4±1% target), but remains consistent with early signs of acceleration in economic activity, an international context characterized by rising USD rates, and a recent sell-off in global stock markets that has put upside pressure on USDIDR. As a consequence, IDR has sold off approximately 2% vs USD since the last BI meeting on 18 January; this is the third worst performance in the EM FX space.”
“USDIDR is currently trading higher than 13,600, which is above the 13,300/13,500 trading tolerance range that BI, we think, deems in line with Indonesia's fundamentals. As a consequence, we believe BI may sound slightly more hawkish today and, especially, refrain from further easing banks' reserve requirements or introduce alternative quantitative easing measures. We continue to forecast a 25bps hike in Q2, followed by further tightening by the end of Q3.”
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