Bahana Sekuritas: BI Expected To Hold Interest Rates
JAKARTA - PT Bahana Sekuritas estimates that Bank Indonesia (BI) will maintain its benchmark interest rate at the Board of Governors' Meeting (RDG) on July 20-21 2022 which includes quarterly meetings.
"But BI may change its policy message to be more hawkish than before", wrote PT Bahana Sekuritas in the results of its study, quoted from Antara, Tuesday, July 19.
It said there was market chatter that BI would soon follow in the footsteps of other central banks that raised interest rates massively this month.
With the rupiah showing remarkable resilience to the US dollar rally even after US inflation data topped the mark and dovish signals from BI Governor Perry Warjiyo, markets seem to be saying that BI may not be behind the curve.
Bahana Sekuritas noted that the swap curve no longer expects the US Central Bank, the Fed to raise interest rates by 100 basis points (bps), but sees 75 bps as the most appropriate move this month.
"Holding BI interest rates now will put BI in a very sweet position when there is a reversal in the global tightening cycle later", said Bahana Sekuritas.
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If global central banks move to lower interest rates but BI chooses to keep interest rates, there may be a normalization of yield differentials which should lead to a return of foreign capital inflows.
The holding of interest rates includes not lowering the benchmark interest rate after several months of refusing to raise interest rates.