Bank Indonesia (BI) will announce the benchmark rate today after it ends its two-day board of governors meeting that began on Wednesday. From the domestic side, there are signs of improvement in the country’s macroeconomic data, which include a YoY inflation rate decline to 4.1% in January from 7.0% a year earlier (12M15:3.4%). The gap between inflation and BI rate is still huge while the core inflation also remains manageable at below 5%. Going forward, the inflation burden will remain relatively soft as the electricity tariff declines this month and there is a possibility of further cut in domestic fuel prices next month. In addition, current account deficit (CAD) in 4Q15 reached 2.4% of GDP, which was basically in line with BI’s previous target of CAD sustainable level at 2.5% of GDP. From the external side, a reduced bet arising from US interest rate hike this year also helps the pressure on Rupiah to subside. Furthermore, BI is expected to cut rate further to spur growth given weak latest imports number in January 2016, pointing to still weak domestic demand in early this year.
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