BI may retain the existing BI rate in June

Monthly policy meeting of the Bank Indonesia (BI) will be held on 18 June. BI is expected to keep the BI rate at 7.50%, the BI overnight deposit facility (FASBI) rate at 5.75%, and the BI overnight lending facility (repo) rate at 8.00%, expects Standard Chartered. 

Rate cut would increase pressure on the Indonesian rupiah (IDR) and on import inflation, outweighing the benefits of a cut for real GDP growth, therefore, no rate cut is expected from the central bank this year. Standard Chartered estimates, BI will hike the BI rate by 25bps to 7.75% in September to defend the IDR from the risk of capital outflows due to the US Fed rate hikes that should start in September.