Indonesia: BI easing cycle looks over – UOB

Economist at UOB Group Enrico Tanuwidjaja and Haris Handy assess the latest interest rate decision by the Bank Indonesia (BI).

Key Quotes

“Bank Indonesia (BI) left its benchmark rate unchanged at 3.50% at its March 2021 monetary policy meeting (MPC). The outcome is in line with our expectation and consensus forecast (Bloomberg, Reuters). Consequently, BI maintained the Deposit Facility rate at 2.75%, as well as the Lending Facility rate at 4.25%. BI stated that the decision is in line with the need to maintain the stability of the exchange rate against increasing uncertainty on global financial markets (notably, rising in US Treasury yields), amidst the inflation expectation that remains low.”

“BI has cut the benchmark rate six times by 150 basis points since the beginning of the COVID19 pandemic, in its efforts to accelerate Indonesia's economic recovery.”

“We continue to affirm our view that the rate cut made in the February MPC meeting is likely to mark the end of the rate cut cycle by BI. We keep our BI rate forecast at 3.50% for the rest of the year. BI will remain accommodative via other monetary, macroprudential, and liquiditysupporting measures to further support national economic recovery.”