IDR: BI prioritizes FX stability over growth – BNY

BNY analysts expect Bank Indonesia (BI) to keep its policy rate unchanged at 4.75% (February 19) and maintaining an easing bias but with a high bar for further cuts. The bank highlights BI’s shift away from an “all-out pro-growth” stance toward Rupiah stability, including potential large FX interventions. Elevated lending rates and administrative measures like nickel output cuts support currency valuations.

On-hold BI with FX stability focus

"We expect Bank Indonesia to keep its policy rate unchanged at 4.75%."

"While BI is likely to retain an easing bias, the bar for further rate cuts remains high."

"Notably, recent communication has dropped references to an “all-out pro-growth” stance, with greater emphasis instead on rupiah stability, including the possibility of very large FX interventions (versus earlier references to “bold” interventions)."

"BI is expected to continue asserting vigilance amid ongoing volatility in local assets."

"However, such a step can be seen as another tool to help support currency valuations – an administrative measure rather than direct intervention – and its impact takes time to feed through and is often overlooked initially."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)