Bank Indonesia Holds, but the Hiking Cycle May Not Be Over: ING Economic Analysis

Key Takeaways

• 1.Bank Indonesia kept its benchmark policy rate on hold at 5.75%, opting for targeted market measures like lower hedging swap premia to support the rupiah rather than raising borrowing costs.
• 2.Foreign investor sentiment toward Indonesian bonds has cautiously improved with four consecutive months of net inflows, supported by fiscal discipline and budget continuity.
• 3.External account vulnerabilities, lower FX reserves, and inflation risks from fuel prices and El Niño mean the tightening cycle is likely not over, with one 25bp hike expected before year-end.

Table of Contents

• Bank Indonesia holds rates, announces measures to support rupiah
• Foreign investors are returning, cautiously
• Rupiah and inflation risks keep tightening on the table

Report data

Bank Indonesia has opted to keep policy rates unchanged at 5.75%

Reports in this series

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