IDR: Stability-first stance supports currency – Societe Generale

Societe Generale analysts Kunal Kundu and Galvin Chia note that Bank Indonesia (BI) kept its policy rate at 4.75% and retained its 2.5% ±1% inflation target, emphasizing a stability-first approach. They highlight that the central bank sees no urgency to tighten further and is resisting premature easing as it prioritizes currency stabilization and manages risks from Oil prices and Middle East-related global spillovers.

Bank Indonesia prioritizes currency stabilization

"As expected, Bank Indonesia (BI) held the policy rate at 4.75%, sticking to its stability-first playbook amid elevated global spillovers."

"It also maintained the 2.5% ±1% inflation target, supported by fiscal buffers, signalling no urgency to tighten further, while pushing back against premature easing."

"With “on-again, off-again” ceasefire hopes still alive, BI is betting the oil shock is short-lived."

"But with the Iran conflict’s endgame still uncertain, the central bank is rightly choosing caution."

"BI framed the hold as consistent with strengthening currency stabilisation amid a deterioration in global conditions linked to Middle East conflict."

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