LPEM COMMENTARY BI BOARD OF GOVERNORS’ MEETING MAY 2017

Despite rising inflation, which currently stands at 4.17% (y.o.y.) or 1.28% (ytd), and high likelihood of June’s rate hike by the Fed, we view that Bank Indonesia should still hold the policy rate at 4.75% in Thurs day meeting.   The fact  that  market participants seem to have currently priced in the chance of June’s rate hike, no tangible prospect of further appreciation of oil price, and slight appreciation of Rupiah due to capital inflow further demonstrates no strong reason for BI to change the policy rate.

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