Bank Indonesia likely to maintain cautious tone at its monetary policy meeting, says DBS Group Research

Bank Indonesia is expected to maintain a cautious tone at its monetary policy meeting, scheduled to be held later this week, after raising the policy rate by a cumulative 50 basis points in May, according to the latest research report from DBS Bank.

Despite subdued inflation risks, financial and rupiah stability are likely to dictate the central bank’s policy direction over the next few months.

While an urgency for another hike this week is not seen by market participants, the door remains open for at least another 25 basis points hike in the second half of this year.

Meanwhile, on the trade front, a net oil trade deficit coupled with higher investments-led import demand suggests that the merchandise trade deficit will remain under pressure in May.