YAKARTA (Reuters) – Indonesia’s central bank is expected to keep its key policy rate unchanged next week after reducing it 4 times so far this year in an effort to mitigate the effect of the coronavirus pandemic.
Sixteen of the 20 economists who responded to a Reuters survey said they saw the Bank of Indonesia maintain the 7-day IDCBRR-ECI 4.00% reference closure at the conclusion of its two-day political assembly on Wednesday.
This year’s 4 discounts resulted in a minimum of one hundred basis points in the benchmark rate, which was combined with discounts totaling one hundred basic problems in 2019.
“We no longer have rate cuts in our base scenario,” Morgan Stanley analysts wrote in a note to customers, pointing to a replacement in the tone of Gov. War Perryjiyo’s forecasts after last month’s rate cut. He did not say there was room for additional relaxation as he had in the past and his comments were in favor of greater liquidity.
Citibank analysts pointed to cash market rate cuts beyond central bank rate cuts. This amounted to “secret relaxation,” they said, and may mean that BI did need to reduce the baseline rate due to balance-of-payments risks.
Four economists surveyed predicted a reduction of 25 key points.
Hit by the pandemic, Southeast Asia’s largest economy fell by 5.32% at the time quarter to the pandemic, the first quarterly contraction in more than two decades.
DBS economist Radhika Rao, who are expecting a cut next week, said benign inflation gave the IB room to maneuver and relief would help the economy from new growth hazards.
While the government has forecast strong economic expansion this year, the GDP of some independent analysts will shrink, the first time for the resource-rich country since the 1998 Asian monetary crisis.
Last month, BI and the government agreed on a $40 billion budget deficit financing plan that involves BI buying $28 billion in interest-free bonds. The central bank has also injected liquidity into the banking formula by reducing reserve requirements.
Survey through Nilufar Rizki and Fransiska Nangoy in Jakarta, Shaloo Shrivastava in Bangalore; Writing through Tabita Diela; Editing through Gayatri Suroyo and Edwina Gibbs
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