Bank Indonesia left the benchmark rate steady at 5.75% for an eighth consecutive month. Global and domestic growth projections were left unchanged, with policymakers focused on rupiah stability and simmering price pressures. Apart from a strong dollar, a narrowing goods trade surplus, and moderation in the reserves stock, have led the IDR to lose ground this quarter. While the ‘triple intervention’ remains the favoured approach to stabilize the IDR, policymakers are likely to count on the success of the newly introduced SRBIs (see Indonesia: New money market tool SRBIs to garner interest) to draw more inflows. Hopes are also for an improvement in dollar liquidity on earlier steps to re-channel export proceeds back into the onshore markets. Two SRBI auctions yet far have been oversubscribed by 4x and 3x respectively, with banks separately attracting $1.3bn in FX export proceeds, according to the BI. Separately, administrative measures will be required to address domestic food (especially rice) pressures, even as base effects are likely to push the headline inflation lower in Sep/Oct23. An increase in domestic subsidized fuel prices is, however, unlikely, in order to preserve purchasing power and before the elections in Feb24.
Bangko Sentral ng Pilipinas (BSP) stuck to its ‘hawkish hold’ as policymakers seek to balance a jump in inflation with faltering growth momentum at home. Factoring in risks from poor weather, rising global oil, and peso depreciation, inflation forecasts were revised higher. Inflation is now pegged at 5.8% (vs 5.6% previously) for 2023, to 3.5% (vs 3.3% prev) for 2024, while 2025’s was maintained at 3.4%. Policymakers are hopeful that inflation will return to the target by 4Q23 on the back of administrative measures and absence of further supply-induced shocks. Earlier in the month, the monetary policy rate was renamed as ‘Target RRP rate’, which will be different from the ‘overnight RRP rate’ which is a market-determined short-term rate which signals the prevailing policy stance.
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