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Bank Indonesia holds policy rate at 5.75% as rupiah stabilizes
MUFG expects further BI tightening later, citing elevated US Treasury yields and global uncertainty despite BI keeping rates on hold.
Bank Indonesia held its policy rate at 5.75%, defying market expectations for a 25 basis point hike, after recent stabilization in the rupiah gave policymakers room to stay on hold, according to MUFG commentary carried by FXStreet.
MUFG’s Lloyd Chan said Bank Indonesia Governor Perry Warjiyo preferred targeted measures to support foreign inflows rather than higher rates, including raising SRBI yields and reducing hedging swap costs for investors.
Even with the currency stabilization, MUFG expects additional BI tightening, citing elevated US Treasury yields and heightened global uncertainties that could keep pressure on the rupiah.
FXStreet also noted BI’s view that the Fed may tighten policy in Q4, which MUFG expects could further require BI action even as recent FX-support measures moderate the pace of rupiah depreciation.