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Monetary Watch 24 Mei 2018
May 25, 2018 09:07

Despite the economic growth that need to be supported, BI rose the 7-Day RR rate at the May monetary policy meeting, held on 16 – 17 May. The 7-Day RR rate was increased by 25bps to 4.50 percent, while both the deposits and lending facility rates were also hiked by 25 bps to 3.75 and 5.25 percent, respectively.

As the global market volatility increased and liquidity is on the tighter trend, our interbank interest rate as proxied by the JIBOR O/N rate started to show an increasing trend as well. Its average rate in the first three weeks of April was 4.0 percent, and when rounded to the end of April, the average increased to 4.05 percent. The average of JIBOR O/N rate in the first three weeks of May kept on raising to 4.07 percent.

In next month’s governors’ meeting, BI is likely to hike the benchmark rate given the high pressure on rupiah due to concerns over sentiment from expectations of the Fed intent on boosting interest rate and raising on US treasury yield in account of widen fiscal deficit. Moreover, The Fed’s balance sheet normalization absorbs dollar from global financial market. Growing volatility on rupiah toward global uncertainty result in no room for BI to cut benchmark rate this year. Against this backdrop we expect BI to hike benchmark rate up to 4.75 percent ini 2018.