Indonesia Macro Update - BI7DRR Update 17 Jan 2024
KBVS MACRO UPDATE
Wednesday, 17 January 2024
BI Rate Maintained at 6.0%: BI's Pro-Stability Stance
Bank Indonesia (BI) has chosen to uphold the Bi Rate at 6.00% (Cons: 6.00%, KBVS: 6.00%, Prev: 6.00%). This decision is viewed as a proactive measure by BI, particularly in safeguarding the stability of the Rupiah. Furthermore, the sustained BI Rate at 6.0% appears to demonstrate the central bank's commitment to consistent monetary policy, aiming to retain foreign interest in the domestic money market.
On the other hand, the well-maintained domestic inflation at 2.61% YoY in Dec '23 is seen as a key factor supporting the potential decrease in the BI Rate in 2024.
In this BI RDG, we also perceive signals of a potential BI Rate reduction in 2024. Nevertheless, it appears that BI will exercise caution in lowering the BI Rate, ensuring the stability of the Rupiah, sustaining non-resident appetite for domestic money market instruments, and managing domestic inflation risks. Consequently, we assume that any potential BI Rate reduction this year will align with the decrease in the Fed Rate to avoid potential financial market and domestic economic volatility.
Regards,
Fikri C Permana - KBVS Research Team