The Indonesia central bank, Bank Indonesia, is expected to keep the key interest rate unchanged during its meeting tomorrow, according to a Societe Generale research report. The focus is likely to be on maintaining macroeconomic and financial system stability, with a stress on the domestic economic rebound amidst uncertainties in the global financial market.
The Indonesian economic growth came in line with expectations at 5 percent year-on-year in the fourth quarter. The economic activity is expected to improve with the help of exports and rebounding investment activity as financing increases from bank loans and non-bank financing. Also, household consumption is expected to remain stable, stated Societe Generale.
Indonesia’s inflation has bottomed out and is likely to accelerate as the existing high base effect fades. Inflation accelerated to 3.49 percent in January due to a sharp rise in administered prices as the government continues to concentrate on lowering its subsidy level. Moreover, increasing crude prices have resulted in transport cost continuing to move up, which might eventually result in a second-round impact on inflation. The sequential rise in January transport and communication inflation is the highest since December 2014.
“As the prospects of economic activity in 2017 improves while at the same time inflation is expected to inch up, we expect BI to remain on hold during its forthcoming meeting”, added Societe Generale.
