Central Bank leaves rates unchanged in October

BI hold meets market expectations: At its meeting on 15–16 October, Bank Indonesia (BI) decided to maintain the BI-Rate at 6.00%. The decision followed September’s cut and aligned with market expectations.

Rupiah weakness prompts hold: BI highlighted that its key short-term focus is to ensure rupiah stability; the Bank intervened in recent weeks to stop the currency slumping against the USD. Therefore, in light of the rupiah’s recent downtrend and increasing global market uncertainty, BI deemed it necessary to pause its monetary easing cycle. The Bank’s also noted that its decision remained consistent with maintaining inflation within the 1.5–3.5% target corridor for 2024 and 2025, and supporting sustainable economic growth.

BI retains a dovish tone: The Central Bank stated that it would consider lowering the policy rate ahead if inflation remains within target, the rupiah stable, and economic growth robust. Against this backdrop, our Consensus is for additional cuts by end-2024 and in 2025, with a cumulative reduction of around 100 basis points. The next meeting is scheduled for 19–20 November.

Panelist insight: Nomura analysts commented: “We continue to expect one more 25bp cut this year to 5.75%, more likely in December than November, given US election-related uncertainty. Considering BI’s dovish comment that it will monitor scope for further easing, and its pro-growth stance in supporting domestic demand, we think today’s pause is temporary. Beyond this year, we expect an additional 75bp in cuts in H1 2025 by BI, bringing the policy rate to 5.0% and total rate cuts in this cycle to 125bp.”

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