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ING: Bank Indonesia To Hold Rate, Retain Accommodative Stance

Bank Indonesia is set to announce its latest interest rate decision on January 23, Thursday. The bank is widely expected to keep its key interest rate unchanged for a third policy session in a row.

ING expects BI Governor Perry Warjiyo to keep the door open for further rate cuts, with inflation well within target and growth momentum still sluggish amidst the global trade war.

"We will be watching for clues for when Warjiyo will time his next policy rate cut," ING economist Nicholas Mapa said.

"With global growth only expected to post a modest recovery in 2020, we believe that the BI Governor will cut policy rates as early as the first quarter and when IDR exhibits more stability on financial account inflows."

While the Indonesian rupiah opened the year on a strong note, thanks to robust foreign inflows from last year, the recent emerging market slow-down due to concerns over the Wuhan coronavirus outbreak show inflows can reverse very quickly.

"The IDR is now under pressure with foreign players opting to stay defensive amidst the new health scare," the economist noted.

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