ING economists Deepali Bhargava, Lynn Song and Min Joo Kang expect Bank Indonesia (BI) to shift toward a tighter stance at its upcoming meeting. They highlight recent Indonesian Rupiah weakness, ongoing FX intervention and wider rate differentials versus the United States. With currency stability still the main priority, they anticipate a 25 basis point policy rate increase this week.

Rupiah weakness pushes BI toward tightening

"Much has changed since Bank Indonesia’s last monetary policy meeting, when BI left rates unchanged and refrained from signalling a more hawkish stance."

"Since then, the IDR has depreciated by over 1.5%, despite active BI intervention in FX markets to contain currency pressures."

"At the same time, expectations for Federal Reserve rate cuts have shifted amid resilient US macro data, further widening rate differentials unfavourably for the IDR."

"Given BI’s continued emphasis on currency stability, we expect the central bank to pivot toward tightening and deliver a 25 bp rate hike at Wednesday’s meeting."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)