Economy
Bank Indonesia to hold key rate at 5.75% for rest of year
Bank Indonesia (BI) will keep its key interest rate unchanged at 5.75% for a fifth consecutive meeting on Thursday and for the rest of the year, as inflation eased in May and was expected to decline further.
After peaking around 6% in September, inflation gradually eased to reach the upper end of BI’s 2-4% target range last month, suggesting BI can wait and watch, even as policymakers in the U.S. and Europe are likely to continue tightening policy.
All 34 economists in the June 14-19 Reuters poll expected the central bank to hold its benchmark seven-day reverse repurchase rate at the conclusion of its June 21-22 meeting.
Nearly two-thirds of respondents, 15 of 23, said the key policy rate would remain at that level for the rest of 2023, with eight economists expecting a rate cut this year.
“Bank Indonesia was one of the first central banks in the region to pause its tightening cycle earlier this year. We believe BI will carry out an extended pause to shore up support for the Indonesian rupiah,” said Nicholas Mapa, senior economist at ING.
Mapa added BI would “only consider cutting policy rates should global central banks opt to ease monetary policy.”
Similar to its regional peers, BI was expected to leave rates where they are for the remainder of the year as rate cuts would lead to a weaker currency and higher imported inflation.
The Indonesian rupiah, one of the best-performing Asian currencies, is up over 4% against the dollar this year.
“While the central bank’s next rate move is likely to be a cut, the timing of an easing pivot will depend on external conditions, with clear signs that the U.S. Fed is at least on a prolonged pause a pre-requisite, in our view,” said Khoon Goh, head of Asia research at ANZ.
“Our base call is for BI’s first cut to materialise in 2024; robust consumer sentiment and flush liquidity conditions in the banking system also suggest no urgency for a quick pivot.”
Median forecasts showed a 25-basis-point rate cut to 5.50% in the first quarter of 2024, a slight downgrade from the 50-basis-point cut expected in a May poll.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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