Bank Indonesia to keep rates steady on Sept 18, cut in Q4: Reuters poll by Reuters

By Rahul Trivedi

BENGALURU (Reuters) – Bank Indonesia (BI) will leave interest rates unchanged next week to support the rupiah, but was expected to cut next quarter after the U.S. Federal Reserve eased policy on Sept. 18, a survey found Reuters.

With inflation holding well within the BI’s target range of 1.5%-3.5% from mid-2023, Governor Perry Warjiyo said in August that the focus for this quarter would be on supporting the exchange rate of rupee against the US dollar as a strong currency helps control inflation. through cheaper imports.

Expectations that the Fed will cut rates by at least 75 basis points this year helped the rupee gain nearly 5 percent against the dollar in August, giving BI enough room to cut rates less than the US central bank.

Thirty of 33 economists polled in a Reuters poll from September 9-12 expect the central bank to keep the benchmark seven-day reverse repo rate unchanged at 6.25 percent at the end of its two-day meeting on September 18.

BI was also forecast to keep overnight deposit facility and lending facility rates unchanged at 5.50% and 7.00% respectively.

“BI will remain vigilant on the rupiah even as it acknowledges the need for a more accommodative monetary policy to support growth,” said Brian Lee Shun Rong, economist at Maybank.

Median forecasts showed that the first 25 bps cut should take place next quarter. That outlook was largely unchanged from a July survey.

Those providing forecasts to the end of 2025 predicted that the BI would cut rates by 100 bps to 5.25% from the current level. The Fed was expected to cut rates by 175bp over the same period.

“I see BI taking a more gradual (and) measured approach to rate cuts over the next 12 to 18 months, compared to other regional central banks that may cut more aggressively because the Fed will cut quite aggressively.” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics.