Bank Indonesia Likely to Hold Rate Steady

Bank Indonesia will likely keep its overnight policy rate unchanged at 6.75% when it meets Thursday as inflation continued to slow down in April.

All 14 economists polled by Dow Jones Newswires expect Bank Indonesia to keep its benchmark rate steady after data released last week showed the consumer price index rose 6.16% from a year earlier in April, slowing from the gain of 6.65% in March and below the 6.32% median forecast of nine economist polled by Dow Jones Newswires.
While core inflation--which excludes volatile food prices and the tariffs controlled by the government--climbed to 4.62% in April, edging up since December from 4.28%, Bank Indonesia Governor Darmin Nasution said the reading isn't yet exerting pressure for a rate hike.
Nasution, however, indicated that the central bank is maintaining its tight monetary stance as inflationary pressures are expected to gain pace in the second half of the year. Since lowering its policy rate to 6.50% during the depths of the global financial crisis, Bank Indonesia has raised the rate only once, by 25 basis points, wary of further attracting short-term capital inflows.
The moderation in headline inflation since February gives Bank Indonesia room to postpone policy rate hikes, Standard Chartered economist Eric Alexander Sugandi said.
“We still expect the BI rate to be hiked by 50 basis points to 7.25%, but we changed our expected timing from the second quarter to the third quarter,“ he said.