Tuesday, September 21, 2021 7:00 AM EDT
Bank Indonesia kept policy rates untouched as the recovery is seen as gradual.
Source: IMF/Flickr Perry Warjiyo, Governor of Bank Indonesia
Central bank left rates unchanged to support gradual recovery
Bank Indonesia (BI) retained its accommodative stance primarily to help support the fledgling economic recovery. BI Governor, Perry Warjiyo, noted that global growth momentum hit a speed bump mid-year as the Delta variant spread across most countries. Meanwhile, domestic growth is expected to be “gradual” and the central bank retained its GDP forecast of 3.5% - 4.3%, slightly below the official expectation for the 3.7% - 4.5% range set by the national government.
BI has room to keep rates unchanged with inflation below target
Source: Badan Pusat Statistik
Export surprise to support external account and IDR in the near term
Warjiyo remains confident that Indonesia's rupiah will stabilize “in-line with fundamentals” in the coming months. The surprise outperformance of the export sector will lend some support to the external account and in turn, bolster IDR as the trade surplus swells. Despite this recent positive development, Warjiyo kept his previous current account expectation for the deficit to settle between 0.6% - 1.4% of GDP. BI reiterated its stance to take necessary measures to keep the current account stable when needed, with triple intervention likely called into play during bouts of uncertainty.
Momentum hit by Delta wave but rebound expected as economy reopens
Source: Bank Indonesia
More upbeat on economy but expect support for longer
The recent Delta Covid-19 wave forced authorities to deploy mobility restrictions in July and part of August, weighing on overall growth momentum. With daily infections now more under control, the economy has gradually reopened with authorities hoping to get growth back on track. With inflation below the central bank’s 2% - 4% target, we expect Governor Warjiyo to have all the necessary space to retain his “pro-growth” stance to support the recovery. We believe that BI will keep rates untouched for the balance of 2021 given the current inflation and growth situation.
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...
more
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.
less
How did you like this article? Let us know so we can better customize your reading experience.
No Thumbs up yet!
