VOI - Voice of Indonesia | RRI - Radio Republik Indonesia

Bank Indonesia's logo is seen at Bank Indonesia headquarters in Jakarta, Indonesia, September 2, 2020. REUTERS/Ajeng Dinar Ulfiana/file photo - 

Voinews, Jakarta - Bank Indonesia will maintain its key policy rate for a second month on Thursday as inflation is within its target range and the rupiah has stabilised, showed a Reuters poll of economists who forecast the first cut to be in the third quarter of 2024.

Inflation has stayed within the central bank's 2023 2 per cent to 4 per cent target range for sixth consecutive months despite an uptick in inflation last month.

The rupiah has gained nearly 2 per cent since a surprise rate hike in October, easing pressure on imported prices.

Governor Perry Warjiyo recently said the policy rate would be on hold into next year as it was restrictive enough to keep inflation within the bank's 1.5 per cent to 3.5 per cent target for 2024 and the rupiah would become more stable as the U.S. Federal Reserve was widely expected to start policy easing next year.

All 28 economists in the Dec. 11-18 poll expected Bank Indonesia (BI) to hold its benchmark seven-day reverse repurchase rate at 6.00 per cent at the conclusion of its Dec. 20-21 meeting.

"Bank Indonesia will likely remain on hold ... given manageable inflation and currency movement. Although we expect inflation to remain comfortably within the bank's new inflation target next year, risks are tilted to the upside," said economist Makoto Tsuchiya at Oxford Economics.

"We expect the rupiah strength to partly reverse towards the end of the year, (but) we think another hike is unlikely. The next move will likely be a cut. BI will likely shift its focus to a growth picture gradually towards the middle of the year."

Median forecasts showed the key interest rate unchanged until at least the end of the second quarter of 2024, followed by a 50 basis-point cut in the third quarter to end the year at 5.50 per cent.

For the second quarter next year, 10 of 22 respondents saw rates at 5.75 per cent or lower. Only eight had that view in a November poll.

Nearly all economists said the next move from BI would be a cut. Among those who provided third-quarter forecasts, 15 of 19, or over 75 per cent, expected the rate to be 5.75 per cent or lower, while four saw it at 6.00 per cent.

"The dovish tone emerging from the recent Fed meeting should be good news for BI. We expect the central bank to remain on hold for the next few months rather than opt to reverse the unexpected October hike and we do not rule out the bank opting for a rate cut earlier than we have been expecting," said economist Kunal Kundu at Societe Generale.

"What above-target inflation might mean is a shallow easing trajectory. In fact, with growth yet to be on a strong footing and a national election looming next year, there is every case for monetary policy to be supportive of the economy. Hence, the next policy rate change will be a cut."

Warjiyo put Indonesia's GDP growth outlook within a range of 4.7 per cent to 5.5 per cent for 2024 and 4.8 per cent to 5.6 per cent for 2025. However, headwind was still expected from weakening global economic growth//VOI