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Bank Indonesia (BI) is expected to keep rates unchanged at its monetary policy meeting on January 23, with monetary authorities closely monitoring the recent performance of the IDR, according to the latest research report from ING Economics.
Governor Warjiyo will be expected to reiterate his accommodative stance, with inflation well within target and growth momentum still sluggish amidst the global trade war.
The IDR had opened the year on a strong note, with foreign inflows sustained from last year. Foreign inflows were likely driven on hopes for swift delivery of the President's reform package - Jokowi has vowed to revamp labour laws while also lowering corporate taxes, the report added.
The recent emerging market sell-down, induced by concerns linked to the new strain of coronavirus, reminded monetary authorities that portfolio flows can reverse very quickly. The IDR is now under pressure with foreign players opting to stay defensive amidst the new health scare.
"With global growth only expected to post a modest recovery in 2020, we believe that the BI Governor will cut policy rates as early as the first quarter and when IDR exhibits more stability on financial account inflows," ING further commented in the report.
