17 Mar 2015
Bank Indonesia to consider a rate cut today - TDS
FXStreet (Barcelona) - Cristian Maggio, Head of Emerging Markets Research at TD Securities, views that Bank Indonesia might cut rates by 25bp today to provide more stimulus ahead of a probable Fed rate hike.
Key Quotes
“When Bank Indonesia announced interest rates last time on February 17, the MPC surprised the market with a 25bp cut of the benchmark BI rate to 7.50% and the FASBI rate to 5.50%. Expectations (including ours) pointed at steady rates in February.”
“We concur with that small minority who think that a 25bp rate cut is more likely than a hold, but risks are high and the call is very close.”
“There are essentially two reasons for lowering rates that may prevail over BI’s opposite considerations. One is inflation, which continues to fall despite the November fuel price hike and the sharp jump in CPI around the turn of the year.”
“The second is growth, which has disappointed in 2014 and, despite bottoming out likely between Q3 and Q4 2014, continues to exhibit a weak dynamic that may require more stimulus to reduce downside risks.”
“if BI thinks that growth should prevail, while inflation is set to fall within target and possibly below the central target by year-end, it makes sense to provide more stimulus before the Fed starts hiking (we continue to expect September) or the markets become jittery on more hawkish Fed rhetoric.”
Key Quotes
“When Bank Indonesia announced interest rates last time on February 17, the MPC surprised the market with a 25bp cut of the benchmark BI rate to 7.50% and the FASBI rate to 5.50%. Expectations (including ours) pointed at steady rates in February.”
“We concur with that small minority who think that a 25bp rate cut is more likely than a hold, but risks are high and the call is very close.”
“There are essentially two reasons for lowering rates that may prevail over BI’s opposite considerations. One is inflation, which continues to fall despite the November fuel price hike and the sharp jump in CPI around the turn of the year.”
“The second is growth, which has disappointed in 2014 and, despite bottoming out likely between Q3 and Q4 2014, continues to exhibit a weak dynamic that may require more stimulus to reduce downside risks.”
“if BI thinks that growth should prevail, while inflation is set to fall within target and possibly below the central target by year-end, it makes sense to provide more stimulus before the Fed starts hiking (we continue to expect September) or the markets become jittery on more hawkish Fed rhetoric.”