The Jakarta Post
Bank Indonesia is expected to maintain its seven-day reserve repo rate ( 7DRRR ) at 5.5 percent during a board of governors meeting from Sept. 26 to 27 even though the Federal Reserve is expected to increase its rate to 2.25 percent.
“I expect that BI will adopt a conservative approach, namely by maintaining its reference rate at 5.5 percent,” said Yogyakarta-based Gadjah Mada University economist Tony Prasetiantoro on Sunday as reported by kontan.co.id.
In fact, he said BI faced a dilemma because the Fed was almost sure to increase the Fed Fund Rate during the Federal Open Market Committee (FOMC) meeting from Sept. 25 to 26.
Tony’s opinion was based on a number of factors, including the improvement of the US economy, indicated by the creation of 201,000 jobs in July and low inflation.
He said BI would maintain its 7DRRR this month, but the central bank would study the impact of the new Fed Fund Rate, which was expected to be decided on Sept. 26.
Security firm Bahana Sekuritas chief economist Satria Sambijantoro shared Tony’s opinion, saying that there was no reason for BI to increase the 7DRRR while rupiah was strengthening.
“If BI increases the rate, the declining bond rate will increase again,” Satria said, adding that it would increase the cost of bond issuance.
However, ADB Institute economist and project consultant Eric Sugandi had a different opinion. He predicted BI would increase the rate by 25 basis points in line with the move made to be made by the Fed. (bbn)