Focus will also be on Prabowonomics, with an eye on the economic agenda and its fiscal implications.
We retain our call for one more 25bps cut in 4Q24.
Bank Indonesia (BI) paused its rate cuts in October, holding the benchmark rate at 6.0%, following a September cut. This decision was driven by IDR volatility and the need to stabilize the currency. BI also maintained its 2024 growth projection of 4.7-5.5% and expects moderate loan growth of 10-12%. To support lending, BI extended liquidity incentives to Micro, Small Medium Enterprises (MSMEs), agriculture, and manufacturing, while easing down payment requirements for property and auto loans.
Inflation continues to decline, with September’s headline rate at 1.8%, its slowest in three years. Core inflation slightly increased to 2.1%, while food and transportation costs are dropping. The IDR has been volatile, gaining 7% in August before weakening by 3% due to the global dollar’s recovery.
Looking ahead, BI anticipates further US Federal Reserve rate cuts, leaving room for additional easing. BI may lower rates by 25bp this quarter, depending on US dollar and bond market trends, with more cuts expected to bring the benchmark rate to 5% by mid-2025.
New government takes office.
President-elect Prabowo Subianto officially takes office on 20 October 2024, after winning the election with a focus on economic continuity and social welfare.
Key points include:
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