Bank Indonesia Likely not Done Hiking Just Yet

Dow Jones08-19 18:31

1031 GMT - Continued threats to the rupiah amid external uncertainty and meaningful risks from higher energy prices suggest that Bank Indonesia's latest rate hold is a pause rather than the end of its hiking cycle, UOB economists say. The central bank opted to maintain policy settings to preserve currency stability and keep inflation target-bound. The decision signals that BI is firmly focused on defending macro financial stability, and that its policy bias remains one of caution, with anchoring the rupiah continuing to take precedence over growth, writes economist Enrico Tanuwidjaja. Still, given the rupiah's relative steadiness in recent weeks, UOB scales back its BI forecast to just two additional 25bp rate hikes in 4Q. That would bring the policy rate to a terminal level of 6.25% by end-2026.

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