Forex Headwinds Could Keep Indonesia Rates Higher for Longer -- Market Talk

Dow Jones01-07 16:53

0853 GMT - If the dollar keeps strengthening, Indonesia's central bank may be forced to keep monetary policy tighter for longer, hurting economic growth, HSBC economists say. Even as Indonesia's trade balance remains in surplus, there have been portfolio outflows recently, Pranjul Bhandari and Aayushi Chaudhary say. A weak FDI environment amid global policy uncertainty--especially on tariffs--and continued USD strength would cast a shadow over the rupiah, they say. They expect BI rate cuts to be more gradual, given its mandate for a strong IDR. HSBC pencils in three rate cuts in 2025 between 1Q and 2Q, taking the policy rate to 5.25% by June. Downside risks for the economy include blanket U.S. tariffs and a continued decline in global palm oil or coal prices. (fabiana.negrinochoa@wsj.com)

(END) Dow Jones Newswires

January 07, 2025 03:53 ET (08:53 GMT)

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