At its November monetary policy meeting held on Thursday, Indonesia’s central bank, Bank Indonesia (BI), unexpectedly cut its 7-day reverse repo rate by 25bps to 3.75% from the previous 4.0%.
Governor Warjiyo said that the decision took into account low inflation, external stability and to support economic recovery.
Additional comments
Economy has improved supported by govt spending.
Economic recovery continues in October.
GDP seen improving further in 2021.
Q3 balance of payments seen at surplus.
Maintains forecast for 2020 current account deficit below 1.5% of GDP.
2021 current account deficit seen manageable and low.
Rupiah appreciation has potential to continue, still undervalued.
Maintains 2020 inflation forecast at below 2%-4% target range.
Continues to commit to provide liquidity.
Bank Indonesia to continue making sure rupiah levels reflect fundamentals.
US election results, vaccine news, RECP agreement have reduced global financial market uncertainties.
FX implications
On the Indonesian central bank’s surprise rate cut decision, the Indonesian Rupiah (IDR) eased slightly from four-day lows of 14,193 vs. the US dollar.
The USD/IDR pair was last seen trading at 14,174, gaining 0.88% on the day.
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