Indonesia Macro Update - BI7DRR Update 22 Feb 2024
KBVS MACRO UPDATE
Thursday, 22 February 2024
BI Rate Maintained at 6.00%; Waiting For Fed Guidance
The decision to maintain the BI-Rate at 6.00% (Prev: 6.00%) is driven by the imperative of stabilizing inflation and preserving Rupiah stability. This is complemented by BI's push for domestic liquidity and continued promotion of the optimization of SRBI, SVBI, SUVBI, and the implementation of DHE SDA. Moreover, BI anticipates a Fed Rate reduction in 2H24 by up to 75 bps until the end of 2024. We expect this to be followed by a corresponding decrease in the BI-Rate, potentially larger if the Rupiah stabilizes and tends to appreciate throughout 2024.
Furthermore, BI forecasts global economic growth to exceed previous estimates, expecting it to reach 3.0% in 2024, primarily driven by the economic performance of the US and India. On one hand, this is anticipated to lead to a global USD appreciation, while simultaneously fostering an increase in trade surplus and domestic current account surplus, attracting capital inflows due to the attractiveness of domestic government bond yields, thus stabilizing the Rupiah.
Additionally, we continue to emphasize the importance of effective policy coordination among economic authorities to mitigate inflation risks, maintain macroprudential stability, and ensure robust payment system policies. This coordination should also synergize with fiscal stimulus measures by the Government to stimulate economic growth, particularly from the domestic demand side.
Regards,
Fikri C Permana - KBVS Research Team