USD/IDR: Rupiah stays near 23-month highs on Bank Indonesia’s status-quo

At its January monetary policy meeting on Thursday, Indonesia’s central bank, Bank Indonesia (BI), maintained its 7-day reverse repo rate at 5.00%, in line with expectations. The central bank stood pat for the third straight month following four successive rate cuts since July.

The latest Reuters poll showed that 22 of 25 economists expected BI to hold the 7-day reverse repurchase rate steady at 5.00%, at its first policy meeting of the year.

The central bank Governor Warjiyo noted that the economic growth improvement to support further stability in global financial markets in 2020.

Additional Comments:

Global growth prospect has supported inflows into Indonesia, but BI to continue monitor some geopolitical risks.

Household consumptions in Q4 supported by cyclical factors, govt social supports.

Economic growth seen at 5.1%, 2020 growth outlook maintained at 5.1%-5.5%.

2019 current account deficit expected at around 2.7% of GDP, 2020 c/a deficit seen at 2.5%-3% of GDP range.

Rupiah recent appreciation supported by maintain growth prospect, attractiveness of local assets.               

Rupiah appreciation is in line with its fundamentals, positive to economic growth momentum.

Rupiah is expected to remain stable and move according to market mechanism.

Reiterates annualized inflation at end-2020 within range of 2%-4%.

Bank and money market liquidity is adequate.

Bank lending needs to be boosted.

Will continue to take accommodative macroprudential policies.

FX Implications:

On the Indonesian central bank’s no-rate change decision, the Indonesian Rupiah (IDR) remains on front foot against its American counterpart, keeping the USD/IDR close to a 23-month high of 13,605 reached earlier today.