16 Feb 2015
Improving data give BI scope to hold rates in 2015 – TDS
FXStreet (Barcelona) - With Indonesia’s inflation normalizing faster than expected and growth seeming to have bottomed out, BI might keep rates steady for the rest of the year, notes Cristian Maggio, Head of Emerging Markets Research at TD Securities.
Key Quotes
“January CPI surprised analysts falling to 7% Y/Y from 8.4%, 0.5ppt slower than expected. On a seasonally-adjusted basis, the January drop was more remarkable as CPI plunged to –0.93% M/M, down from +2.07% in December and +1.60% in November, when most inflationary pressure was recorded after the government decided to cut fuel subsidies in November last year.”
“Q4 GDP came in 0.1ppt stronger than expected at 5.0% Y/Y, 0.1ppt faster than in Q3, but in line with the Q2 reading.”
“Core inflation is also retreating and now stands at 0.45% M/M SA, equivalent to an annualized rate of 5.5%, just over the top-end of the 4.0%±1% target range for 2015.”
“With growth remaining weak, and depressed global oil prices, we don’t see CPI as a factor of particular concern for BI over the forecasting horizon.”
“According to the revised series, data for the fourth quarter also firmed full-year 2014 growth at 5.0% Y/Y, down from 5.6% in 2013. The cyclical slowdown that has seen Indonesia’s GDP falling for a fourth consecutive year may have reached its low point as quarterly data in Q4 exhibited the first uptick since end-2013.”
“For 2015 and 2016, growth expectations are clustered in the 5.4% and 5.8% region, respectively, with household consumption seen on a modest recovery trend to 5.1-5.4% for both years, gross fixed investment recovering to 6-7%.”
“Therefore, average CPI is seen falling from 6.6% Y/Y in 2015 to 4.7% in 2016. This scenario remains compatible with BI keeping rates steady for longer.”
Key Quotes
“January CPI surprised analysts falling to 7% Y/Y from 8.4%, 0.5ppt slower than expected. On a seasonally-adjusted basis, the January drop was more remarkable as CPI plunged to –0.93% M/M, down from +2.07% in December and +1.60% in November, when most inflationary pressure was recorded after the government decided to cut fuel subsidies in November last year.”
“Q4 GDP came in 0.1ppt stronger than expected at 5.0% Y/Y, 0.1ppt faster than in Q3, but in line with the Q2 reading.”
“Core inflation is also retreating and now stands at 0.45% M/M SA, equivalent to an annualized rate of 5.5%, just over the top-end of the 4.0%±1% target range for 2015.”
“With growth remaining weak, and depressed global oil prices, we don’t see CPI as a factor of particular concern for BI over the forecasting horizon.”
“According to the revised series, data for the fourth quarter also firmed full-year 2014 growth at 5.0% Y/Y, down from 5.6% in 2013. The cyclical slowdown that has seen Indonesia’s GDP falling for a fourth consecutive year may have reached its low point as quarterly data in Q4 exhibited the first uptick since end-2013.”
“For 2015 and 2016, growth expectations are clustered in the 5.4% and 5.8% region, respectively, with household consumption seen on a modest recovery trend to 5.1-5.4% for both years, gross fixed investment recovering to 6-7%.”
“Therefore, average CPI is seen falling from 6.6% Y/Y in 2015 to 4.7% in 2016. This scenario remains compatible with BI keeping rates steady for longer.”