By Susobhan Sarkar
BENGALURU, November 21 (Reuters) – Bank Indonesia (BI) will leave its key policy rate unchanged at 6.00% on Thursday and is likely to keep it at that level until at least mid-2024, according to a Reuters poll of economists, in which some respondents still expected another rate hike.
In spite of inflation rising to 2.56% in October from 2.28% in September, it was still within the central bank’s 2%-4% target range for the year, suggesting that price pressures were less of a concern in Southeast Asia’s largest economy.
Indeed, the surprise of Bank Indonesia 25 basis point tax increase on October 19 aimed to support the a rupeewhich has declined about 8% against the dollar since May.
The coin has since gained nearly 2% against the greenback and was trading around 15,540/$ on Monday. Expectations that the US Federal Reserve was done with hiking rates also boosted the rupee and other Asian currencies.
“Bank Indonesia is likely to keep rates unchanged this month. Rupiah stability was the driving factor behind the unexpected move last month, and since then market pressures have eased with the US dollar and yields retreated following the US Fed’s pause,” Radhika said. Rao. , senior economist at DBS bank.
In a November 14-20 Reuters poll, a strong majority of economists, 27 out of 31, expected Indonesia’s central bank to keep its benchmark key interest rate on hold. IDCBRR=ECI unchanged at 6.00% on Thursday. The remaining four predicted a quarter-percentage-point rise to 6.25%.
Despite medium forecasts showing no change to interest rates at least until the end of the second quarter of 2024, there were many views among economists on the key rate.
While 12 out of 28 put the key rate at 6.00% at the end of June, five had a 6.25% forecast and three had 6.50%. The remaining eight predicted at least a quarter percentage point cut then.
“Our base case is for the first BI rate hike in Q3 2024 … However, the timing and duration will depend on data; BI is likely watching incoming data and the Fed closely to decide its next move,” said Brian Lee Shun. Rong, an economist at Maybank.
(Reporting by Susobhan Sarkar; Additional reporting by Veronica Khongwir; Polling by Milounee Purohit and Veronica Khongwir; Editing by Paul Simao)
((Susobhan.Sarkar@thomsonreuters.com;))
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