Jakarta, CNBC Indonesia – Bank Indonesia (BI) is expected to continue its aggressive policy this month. BI is expected to increase its 7-day Reverse Repurchase Rate (BI7DRR) again by 50 basis points (bps) at its Board of Governors (RDG) meeting on Wednesday and Thursday (November 16-17, 2022) .
Market consensus compiled by CNBC Indonesia expects BI to raise its benchmark interest rate aggressively this month.
Of the 14 institutions involved in consensus building, eight estimated that the central bank would raise the BI7DRR by 50 basis points (bp) to 5.25%.
Meanwhile, six institutions/institutions estimate that BI will raise the benchmark interest rate by 25 basis points to 5.00%.
For the record, BI raised its key interest rate by 125 bps in just three months, respectively by 25 bps in August, 50 bps in September and 50 bps in October.
As of October 2022, BI’s benchmark interest rate position is at 4.75% while the interest rate is Storage area of 4.00% and interest rates loan facility is at 5.50%.
Bank Danamon economist Irman Faiz said BI would hike interest rates aggressively to contain the rupee’s weakening. The policy of the central bank of the United States (USA), The Federal Reserve (The Fed), which is expected to still be aggressive, is also a consideration for BI to raise interest rates by 50 basis points this month.
“Pressure on the rupee exchange rate is still high. We estimate that BI will front loading policy by raising the benchmark interest rate by 50 basis points. This will signal a clear if position BI policy will be more falcon”, said Irman, a CNBC Indonesia.
Refer to the data finishing, the rupee has fallen since October and even weakened by 0.51% in the first week of November 2022. Over the past week, the rupee has actually strengthened by 0.4% against the US dollar.
However, evaluate Garuda threatened to weaken again if the Fed aggressively raises its key interest rate in mid-December.
US market expectations now predict that the Fed will raise interest rates by just 50 basis points in December 2022 and then ease its aggressive policies in 2023. However, last week, Fed Governor Christopher Waller said investors are overreacting to sloping inflation data. He said the market should be prepared for further rate hikes.
Bank Mandiri economist Faisal Rachman explained that the increase in trade balance surplus in October 2022 was indeed capital positive for MH Thamrin’s camp in maintaining rupee stability. However, threats capital outflow still lurking due to the rising trend of global key interest rates.
“The surplus will support foreign exchange reserves and rupee stability to some intermediate level capital outflow,” Faisal said inside MacroShort.
As is known, Indonesia posted a trade balance surplus of $5.67 billion in October 2022, well above market expectations of $4.5 billion.
