Indonesia: BI holding on for now – TDS

Today’s status quo on rates was contrary to TD Securities and market expectations which widely forecasted a 25bp reduction. USD/IDR is trading at 14,826.60.

Key quotes

“BI surprisingly left its 7d reverse repo rate at 4.5%, contrary to ours and market expectations. We think this was a missed opportunity, with conditions ripe for another cut.”

“On the IDR, BI maintains its view that it is undervalued, will gain further, and will intervene to defend the currency. [...] We think further IDR gains may be limited going forward.”

“BI maintained its inflation forecast of 2-4% this year.”

“We expect BI to ease in the months ahead with at least another 25bps likely next month.”