Bank Indonesia likely to hike again – TDS

Analysts at TD Securities think that Bank Indonesia will hike again at its 23 October policy meeting, largely as a result of pressure on the currency, rather than any intensification of inflation.

Key Quotes

“Rate hikes will likely be implemented in addition to other measures to support IDR. While there is a risk that BI takes a pass at the meeting as the central bank assesses the impact of previous hikes and other measures to reduce the current account deficit, we think such a risk is limited.”

“FX: A 25bp rate hike will offer some, albeit limited support for IDR. While BI remains "pre-emptive" and is conducting policy in a "front-loaded" manner, the bulk of the pressure on the IDR has been externally led. External factors continue to remain negative for the IDR, suggesting further depreciation in the months ahead. Higher rates will at least help to slow the depreciation pressure on the currency rather than stem it.”