PREVIEW-Indonesia’s c.bank seen keeping rates unchanged again

Reuters




* Benchmark rate has been 4.75 pct since October
    * All 17 in Reuters poll predict another hold
    * Decision expected after 0700 GMT on Thursday, July 20JAKARTA, July 19 (Reuters) - Indonesia's central bank is
widely expected to leave its benchmark rate unchanged again on
Thursday as it keeps focussing on two key factors: the inflation
rate and U.S. monetary policy.
    Bank Indonesia (BI) halted an easing cycle in October last
year after cutting its benchmark rate <IDCBRR=ECI> six times.
    All 17 analysts in a Reuters poll predicted BI will hold the
7-day reverse repurchase rate at 4.75 percent again.
    "It would be a big shock if (BI) did anything other than
leave rates unchanged at its upcoming meeting," Capital
Economics said in a July 14 note.
    Historically, policy moves by the U.S. Federal Reserve have
sometimes caused volatility in the rupiah <IDR>.  But the
currency has remained stable despite a rate hike in December and
two more this year.
    For sure, BI will continue to monitor the pace of the
Federal Reserve rate hikes and its balance sheet reduction
plans.
    BI Governor Agus Martowardojo, talking to parliament in
recent weeks, has said the rupiah may depreciate slightly next
year, but he insisted the central bank would be comfortable with
the rate. He gave a forecast for 2018 average trading of
13,500-13,800 a dollar.
    At midday Wednesday,  the rupiah was trading at about 13,310
to the dollar.
    Meanwhile, the annual inflation rate in Indonesia reached a
15-month high in June of 4.37 percent, but BI is comfortable
that price rises will stay inside its  target range for the year
of 3-5 percent.
    Southeast Asia's largest economy grew 5.0 percent in the
first quarter. BI's forecast for the April-June quarter growth
was 5.1 percent and 5.2 percent for all of 2017. The country's
statistics bureau is due to announce second quarter GDP growth
on Aug. 7.
    Six of seven economists in the Reuters poll who gave an
opinion about the benchmark rate at the end of 2017 said it
would remain 4.75 percent. The other one, Deutsche Bank,
forecast a 25 basis point hike in the final quarter.
    Gundy Cahyadi, DBS economist in Singapore, said a raising of
the benchmark later this year might become  necessary.
     "Much depends on how significant is the change in market
perceptions about the Fed's (and other major central banks')
intent on policy normalization" in the next year, he said.

 (Reporting by Gayatri Suroyo; Editing by Richard Borsuk)
 (([email protected]; +622129927609; Reuters
Messaging: [email protected]))

Keywords: INDONESIA ECONOMY/RATES (PREVIEW)





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