BI Held Benchmark Policy Rate at 6.75%, Retaining Accommodative Stance

25 April 2016

Rates & FX View

BI Held Benchmark Policy Rate at 6.75%, Retaining Accommodative Stance

Highlights

¨                  BI held the BI policy rate at 6.75% after 3 consecutive 25bps cuts year-to-date

¨                  The 7D reverse repo rate was kept at 5.5%; deposit/lending facility rate kept at 4.75% and 7.25% respectively

¨                  Variable-rate tenders (tenors ranging from 1-week to 12-months) will be employed; fixed 1-week instrument will be benchmark

¨                  BI project stronger 1Q16 and 2Q16 GDP growth; stronger bank loan growth on lower cost of funding

¨                  BI policy rate likely to remain unchanged ahead of the August framework shift; base case for BI to hold the new-framework 7D rates at 5.5% from August 2016

¨                  Reiterating our IDR forecast of 13,100 by 4Q16 on average; upgrading our IndoGB yield forecasts