Indonesia’s central bank to keep policy rate at record high for 4th consecutive meeting (Reuters poll)

JAKARTA (Reuters).

The 26 economists in the poll unanimously expected the Bank of Indonesia (BI) to keep the benchmark interest rate at 3.50% for a fourth consecutive meeting.

Many central banks around the world have already signaled measures to ease their monetary stimulus measures in the era of the pandemic in the run-up to a shrinking of the US Federal Reserve.

Gov. Perry Warjiyo has vowed that BI will keep rates low and liquidity plentiful until policymakers see inflationary pressures, which he says will occur early next year.

Warjiyo also said the central bank must prepare for a possible tightening of US monetary policy next year, warning that such a move by the Fed could impact local financial markets.

Gareth Leather, an economist at Capital Economics, said inflation was not a concern at the moment. Indonesia’s annual inflation rate accelerated to a five-month high of 1.68% in May, but remained below BI’s 2-4% target range.

“Instead, the main concern for BI is the uncertain outlook for the rupee,” he said, adding that expectations of an earlier than expected Fed tightening could add downward pressure. on volatile currency.

The rupee has strengthened in recent weeks after falling in mid-May due to talks about cutting US spending.

Southeast Asia’s largest economy contracted 0.74% year-on-year in January-March after shrinking 2% in 2020 due to the fallout from the pandemic, but the government said he expected the economy to emerge from recession in the second quarter.

BI has cut interest rates by 150 basis points in total and injected more than $ 50 billion in liquidity into the financial system since the start of the coronavirus pandemic in 2020.

“Domestic growth and inflation dynamics warrant further political accommodation,” ANZ economist Krystal Tan said in a research note, adding that an increase in COVID-19 cases increased the uncertainties.

The number of new daily cases rose in Indonesia, with 9,868 infections on Sunday being the highest since February. Hospitals in some cities were under pressure, which could force authorities to tighten mobility restrictions.