Key Points
- Bank Indonesia expects to hold off rate increase on Thursday.
- However, a 25 basis-point hike might appear in the Rupiah currency.
- A majority of economists see tightening in the near future.
Bank Indonesia expects to hold off rate-increase at a record low. However, a 25 basis-point hike may also appear in the Rupiah currency. The situation developed with the steep U.S. rate hikes.
With the patronage of the Indonesian government, Indonesia maintained relatively low inflation. This provided concessions to the people of Indonesia. Since the country faces relatively low inflation, Bank Indonesia expects to hold off rate-increase for at least a month more. However, several other central banks raised interest rates in the face of inflation.
The Singapore and Philippines central banks shocked markets with an out-of-cycle monetary stance reinforcement. Canada, too produced a heavy 100 basis-point rate hike. The inflation in Indonesia rose to 4.35% in June. Albeit the recorded inflation, Bank Indonesia remains one of the only Asian central banks without a change in the rates of the pandemic-related record low.
“Bank Indonesia is expected to leave the benchmark rate on hold this week, citing manageable core inflation numbers and strong trade surpluses providing support to the rupiah,” stated the senior economist at DBS, Radhika Rao. “Pressure to raise rates is nonetheless building ass aggressive Fed rate hikes spur the dollar index sharply higher,” said Rao.
Many economists confirmed that Indonesia could see some tightening, and rates could reach 4%. This situation might come around by September. The majority of the economists that calculated the rate hike till the end of the year saw it rising to 4.25% or more.
Reference,
https://www.channelnewsasia.com/business/bank-indonesia-hold-rates-july-calls-hike-grow-louder-2819786
