Bank Indonesia seen holding rates on Sept. 23, divided on Q4 hike: Reuters poll
Bank Indonesia is widely expected to hold its key interest rate at 5.75% on Wednesday, but a narrower majority of economists polled expect the central bank to raise rates by the end of the year.
75% on Wednesday as recent rupiah stability and subdued inflation give policymakers room to pause, according to a strong majority of economists polled. A narrower majority expects the central bank to raise rates by the end of the year. 75% on Wednesday. 50%, respectively.
Last month, BI kept rates unchanged, while Governor Destry Damayanti reaffirmed the central bank's need to prioritise currency stability. It has raised rates by a total of 100 basis points since May to support the rupiah, which hit a record low against the US dollar at the beginning of June. The rupiah is down around 7% this year against the dollar, but has remained broadly stable since BI's last policy meeting on August 18-19 even as the US Federal Reserve raised interest rates last week by 25 basis points and signalled further tightening in coming months.
In the meantime, the war in the Middle East has escalated, with Iran-backed Houthis attacking US-allied Gulf states, pushing the cost of crude oil higher. Elevated energy costs hurt Indonesia because the country is a net oil importer and relies on hefty fuel subsidies. 5% target range. 00%, by end-2026.
That split was roughly the same as a poll taken in August. Qi Hang Tay, an economist at the Economist Intelligence Unit (EIU), who forecasts one rate rise in the fourth quarter, cited the rupiah's vulnerability to oil prices above $100 a barrel and a hawkish Fed as the main reasons for a potential increase. "These factors will continue to tighten global monetary and financial conditions and result in a weaker external position for Indonesia," he said. Beyond this year, there was no clear consensus among economists on where rates will go next.
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