Bank Indonesia to keep rates steady on Sept 18, cut in Q4: Reuters poll

By Rahul Trivedi

BENGALURU (Reuters) – Bank Indonesia (BI) will leave interest rates unchanged next week to support the rupiah but was expected to cut next quarter, after widely anticipated policy loosening by the U.S. Federal Reserve on Sept. 18, a Reuters poll found.

With inflation staying well within BI’s target range of 1.5%-3.5% since mid-2023, Governor Perry Warjiyo said in August the focus for this quarter will be on supporting the rupiah’s exchange rate against the U.S. dollar as a strong currency helps in controlling inflation via cheaper imports.

Expectations the Fed will cut rates by at least 75 basis points this year have helped the rupiah gain nearly 5% against the dollar in August, providing BI with enough room to make fewer rate cuts than the U.S. central bank.

Thirty of 33 economists surveyed in a Sept. 9-12 Reuters poll forecast the central bank would keep its benchmark seven-day reverse repurchase rate unchanged at 6.25% at the conclusion of its two-day meeting on Sept. 18.

BI was also forecast to keep the overnight deposit facility and lending facility rates unchanged at 5.50% and 7.00%, respectively.

“BI will remain vigilant on the rupiah, even as it recognises the need for more accommodative monetary policy to support growth,” said Brian Lee Shun Rong, an economist at Maybank.

Median forecasts showed the first 25 bps cut was expected to come next quarter. That outlook was broadly unchanged from a July survey.

Those who provided forecasts until end-2025 predicted BI would cut rates by 100 bps to 5.25% from the current level. The Fed was expected to lower rates by 175 bps for the same period.

“I…see BI taking a bit more of a gradual (and) more measured approach to rate cuts over the next 12 to 18 months compared to other regional central banks who might cut more aggressively as the Fed will cut quite aggressively,” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics.