The Indonesian central bank now sees the key rate now, reducing it later this year: Reuters poll

JAKARTA (Reuters) – The Indonesian central bank will keep its interest rates on Thursday, a Reuters poll found, although some economists say that a rate cut to support economic growth is imminent .

The 23 badysts participating in the survey predicted that Bank Indonesia (BI) would maintain its 7-day repo rate at 6.00%, from which it has since increased by 175 basis points between May and November 2018 to defend the rupiah then in trouble. .

The slowdown in the global economy and the end of the tightening of the US Federal Reserve's policy have meant that the rate reduction forecasts for much of Asia are likely.

Indonesian central bank officials noted that a stable rupee, supported by strong capital inflows and moderate inflation, supported the easing of monetary policy, but that a current account deficit narrower is needed before rate cuts.

Unexpected trade surpluses in February and March prompted some economists to anticipate a relaxation cycle.

Six of the seven survey badysts who issued an end-of-year opinion expected rates to drop.

ANZ's Krystal Tan wrote two 25 pencil cuts in pencil.

"The conditions allowing BI to resolve its previous rate hikes are finally starting to come together," Tan said.

"Any sign of a conciliatory pivot in BI policy messages should open the door to a move as early as May, followed by another in August," she added.

CYCLE MINI-EASING?

Mohamed Faiz Nagutha, an economist at Bank of America Merrill Lynch, expects BI to "start a mini-cycle easing and reduce its key rates by 75 basis points between June and August."

Citi economist Helmi Arman has advanced his forecast of a 25 basis point rate cut in the third quarter, starting in the fourth quarter, during which he expects an additional cut 50 basis points.

Antonius Permana, of Bank Negara Indonesia, warned, however, that the gap between current accounts could widen again in April-June, which could delay a reduction in BI.

However, Permana also noted that capital inflows could rise to cover current account deficits easily, after unofficial fast accounts for the April 17 election showed President Joko Widodo in the meantime. 39, get a second five-year term.

"Foreign capital inflows have the potential to grow because political uncertainty has subsided," he said.

The financial markets of Southeast Asia's largest economy rose sharply when they settled one day after last week's elections, buoyed by the news of Widodo's victory, though gains were reduced in the afternoon. Markets were down on Monday.

Fitch Solutions, a research subsidiary of Fitch Ratings, said in a statement that the BI could raise rates by 25 basis points by the end of 2019, based on a forecast of rising inflation as reduction of subsidies after the elections.