Indonesia: Policy continuity supports Rupiah – ING
ING’s Lynn Song expects Bank Indonesia to keep its benchmark rate unchanged at 5.75% this week, prioritizing Rupiah stability while avoiding an immediate hike. The report highlights BI’s growing reliance on non-rate tools such as SRBI yields and FX intervention.
ING’s analyst Lynn Song anticipates Bank Indonesia (BI) maintaining its benchmark rate at 5.75% this week, with a focus on preserving the Rupiah’s stability and refraining from a sudden rate increase. The report sheds light on BI’s increasing reliance on non-rate measures, such as SRBI yields and foreign exchange intervention, instead of immediate rate hikes.
A leadership change at BI is anticipated to diminish the chances of an August rate adjustment, emphasizing the importance of continuity. ING's expectation is that the central bank will keep the benchmark rate at 5.75% on Wednesday. Following BI’s unexpected decision to hold the rate in July, policymakers have become more attuned to balancing the Rupiah’s stability with the need to foster economic growth.
Stability of the exchange rate continues to be BI’s primary concern, although they now appear more open to employing alternative tools like SRBI yields and FX intervention rather than immediately raising borrowing costs. Additionally, the ongoing leadership transition at BI further diminishes the possibility of an August rate hike, as Acting Governor Destry Damayanti is expected to utilize her first official meeting to convey a message of continuity rather than surprise.
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