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Bank Indonesia is expected to maintain its Interest rates unchanged in the upcoming week to support the rupiah. However, a rate cut is anticipated in the next quarter following the anticipated policy easing by the U.S. Federal Reserve on September 18, according to a survey conducted by Reuters.
Governor Perry Warjiyo stated in August that the focus for this quarter would be on bolstering the rupiah’s exchange rate against the U.S. dollar to help control Inflation through cheaper imports. The stable Inflation, within BI’s target range of 1.5%-3.5% since mid-2023, has provided room for the Central bank to consider fewer rate cuts than the U.S. Fed.
The majority of economists surveyed predict that BI will maintain its benchmark seven-day reverse repurchase rate at 6.25% and keep the overnight deposit facility and lending facility rates unchanged at 5.50% and 7.00%, respectively, at the conclusion of the two-day meeting on September 18.
The first 25 basis point cut is expected to come in the next quarter, with projections indicating a total reduction of 100 bps to 5.25% by the end of 2025. This gradual approach contrasts with other regional central banks that may opt for more aggressive rate cuts in line with the anticipated aggressive cuts by the Fed, as stated by Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics.
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Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.
