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Monetary Watch 22 November 2017
November 22, 2017 11:01

MONETARY WATCH: Concerns grow ahead of the December FMOC Meeting

As expected, at its monetary policy meeting from 15-16 November, BI left its benchmark 7-Day RR rate unchanged at 4.25 percent. Meanwhile, the deposit and lending facility rates were kept at 3.50 and 5.00 percent, respectively. The 7-Day RR rate was left unchanged for the second straight month, after it was cut by 25 bps in both August and September. In its statement, BI said that the decision was consistent with its efforts to maintain macroeconomic and financial system stability, whilst it also seeks
to facil itate domest ic economic recovery in addition to taking into consideration global and domestic economic dynamics.

Against this backdrop, the interbank interest rate as proxied by the JIBOR O/N rate has been stable in the last three weeks, which averaged 3.91 percent. Meanwhile, the JIBOR O/N rate in the first three weeks of November was slightly more volatile than it was in the first three weeks of October (0.06 bps vs 0.03 bps, respectively).

We expect concerns to grow ahead of the FMOC meeting in December in which the Fed is expected to hike the FFR (the probability of a rate hike is put at 92.3 percent). Given this, we don’t expect BI to cut its benchmark rate in the December Governors’ meeting.