IDR: Bank Indonesia unlikely to surprise markets yet again - TDS

Analysts at TDS explain that Bank Indonesia surprised the markets by cutting the policy rate by 25bps at each of the last two rate meetings, but today TDS thinks they are unlikely to surprise markets yet again.

Key Quotes

“We and the unanimous consensus expect the benchmark 7-day reverse repo rate to remain unchanged at 4.25%. While the economy is recovering, GDP has so far failed to accelerate from 5% Y/Y and inflation remains below target for now. CPI stood at 3.7% Y/Y in September, below the recent peak of 4.4% in May, but close enough to the target to allow only ever so slightly policy adjustments that wouldn’t result into uncontrolled acceleration in prices. Moreover, the rupiah is about 1.3% weaker vs USD since the last meeting on 22 Sept, when BI surprised for a second time. We think BI will want to avoid adding more depreciatory pressures to IDR at a time that support for the rupiah has already weakened on a combination of domestic and external factors, supporting our expectation for rates to remain on hold today.”