© Reuters. FILE PHOTO: Bank Indonesia’s logo is seen at Bank Indonesia’s headquarters in Jakarta, Indonesia September 2, 2020. REUTERS/Ajeng Dinar Ulfiana
By Sujith Pai and Veronica Dudei Maia Khongwir
BENGALURU (Reuters) – Bank Indonesia is expected to keep its key rate unchanged at 5.75% for a third consecutive meeting on April 18 and for the rest of the year as it assesses the impact of previous hikes on the economy. inflation, according to a poll conducted this week by Reuters found.
Inflation has largely slowed since September, but the March reading of 4.97% was still above Bank Indonesia’s target range of 2% to 4%, which the central bank set in 2005.
But at the March meeting, Indonesia’s central bank stuck to its previous message that the hikes – 225 basis points between August and January – were enough to bring inflation back into the target range later this year.
The 30 economists in the April 10-13 Reuters poll did not expect a change in the seven-day reverse repurchase rate of 5.75%, already the highest since July 2019.
A majority of economists in the survey predicted the key rate would remain at the same level for the rest of 2023. Only a handful of them expected a rate cut this year.
“He (BI) has made it clear that current settings are sufficient to manage inflation, and the latest inflation figures support his view, with headline and core inflation easing in March,” he said. said Krystal Tan, an economist at ANZ.
“There is also little pressure for rate hikes from the external front, with the chances of a very hawkish Fed diminishing and the IDR strengthening. Likewise, there is no urgency either. for an easing pivot.”
Most major central banks, including the US Federal Reserve, were soon to pause their policy tightening cycles to assess the impact of past hikes on reducing inflation.
Nearly two-thirds of respondents, 12 out of 19, expect BI to cut prices by at least 25 basis points in the first quarter of 2024 or earlier, with the median forecast putting it at 5.50%.
Bank Indonesia expects inflation to return to its target range in September, but in the Muslim-majority country, inflation typically spikes during Ramadan, which ends this month, due to increased purchases and consumption.
Inflation is expected to average 4.0% this year and then fall to 3.2% next year, near the midpoint of BI’s target range.
While a commodity-led export boom helped Indonesia’s economy last year, economists expected growth to be more subdued as tighter monetary policy across the world weighs on the economy. global demand.
Economic growth is expected to slow to 4.9% this year, from 5.3% in 2022. It is then expected to grow to 5.0% next year.
(For more articles in the Reuters Long-Term Global Economic Prospects Polls Brief:)
(This story has been reclassified to remove a typographical error in paragraph 3)