No rate change expected from Bank Indonesia
Aug 19 (Reuters) -Bank Indonesia (BI) is likely to keep its seven-dayreverse repo rate unchanged at 6.25% on Wednesdaydespite cuts elsewhere. ThePhilippine central bank was the firstin the region outside of China to deliver a rate cut on Aug 15.
Indonesia'sheadline inflation eased to 2.13% year-on-yearin July from 2.51%in June, driven by lower food and transportation costs, whilecore inflation rose slightly to 1.95% versus 1.90% in June. However, year-to-date headline inflation remains high at 2.7%, closer to the upper end of BI's 1.5%-3.5% target.
The trade surplus plummeted to $470 million in July, the lowest in 14 months, from $2.39 billionin June. The data was well belowexpectations, which should deter BI from cutting rates at present.
Indonesia's steadyeconomic growth alsoindicates no great urgency for the central bank to cut rates, with Q2 GDPexpanding 5.05% annually after 5.11% growth in Q1.
Though USD/IDR has fallen from highs around 16300 in June towards 15600 levels, the central bank will bewary of a fresh IDRsell-off. The focus remains on the U.S. Federal Reserve's rate cut timing and scale. With Fed expectations proving to be a roller-coaster ride this year, BI is unlikely to jumpthe gun and ease before the Fed makesits first move.
BI will remain focused onmaintaining the rupiah's stability in the near termand preventing foreign investoroutflows.
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Catherine Tan is a Reuters market analyst. The views expressed are her own. Editing by Sonali Desai
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