Bank Indonesia to hold rates on April 23 as FX concerns outweigh growth risks – Reuters poll

BENGALURU : Bank Indonesia will hold interest rates steady on Wednesday to support the under-pressure rupiah, despite growing concerns of slowing economic growth driven by U.S.-led trade policies, a Reuters poll of economists found.

With the rupiah down more than 4 per cent this year, and hovering near a record low, the central bank will probably remain cautious about rushing into a cut.

The currency had initially come under pressure from the impact of President Prabowo Subianto’s fiscal plans, but more recently also by a 32 per cent tariff imposed on all Indonesian goods imported by the United States, currently paused for 90 days.

Southeast Asia’s largest economy has grown steadily at around 5 per cent for years, but U.S. tariffs could slow it by 0.3 per cent to 0.5 per cent, Finance Minister Sri Mulyani Indrawati said recently.

Indonesia is currently negotiating a trade deal with Washington.

All but two of the 26 economists in the April 14–21 Reuters poll predicted the central bank would keep its benchmark seven-day reverse repurchase rate at 5.75 per cent on Wednesday. 

The overnight deposit and lending facility rates are also expected to remain at 5.00 per cent and 6.50 per cent, respectively.

“With USD/IDR surging visibly after the Eid holiday, we doubt Bank Indonesia will be able to resume rate cuts in April,” said Brian Tan, senior regional economist at Barclays.

“That said, the need to support economic growth is likely rising due to the slowdown in government spending and recent developments on the U.S. tariff front.”

TIMING

Economists forecast that the central bank will probably lower its key policy rate by 25 basis points to 5.50 per cent this quarter, and to 5.25 per cent in the third quarter, where it is expected to remain until the end of 2025.

“We still expect Bank Indonesia’s next move to be a 25 basis point interest rate cut but the timing of the cut has become increasingly uncertain,” said Jeemin Bang, associate economist at Moody’s Analytics.

The poll also forecast inflation to average 2.1 per cent this year, rising to 2.7 per cent next year, while economic growth was expected to average 4.8 per cent in 2025 and 4.9 per cent in 2026, slightly lower than the previous poll and official projections.

(Other stories from the April Reuters global economic poll)