MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, September 2019

Unexpected rate cut last month implies BI’s concern over the risks of curbing domestic growth, prompting BI to shift its policy stance to one that preemptively supports growth.  Inflation is low and stable. Despite the lower-than-expected economic growth in the Q2 2019 (5.05%), the domestic economy is still perceived relatively favorably by foreign investors despite.  On the external side, the relaxing tension of US-China Trade War and the probability of Fed funds rate cut at the upcoming FOMC meeting has partly contributed to the influx of portfolio investment. On the current account performance, we see some signs of improvement to bring the CAD to be more managable until the end of the year. These developments should open space room for BI to ease its monetary policy further. We view that BI should continue the easing stance with another 25bps rate cut this month.

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