- Bank Indonesia’s FX reserves stood at USD 139 Bn in May-24, increasing by USD 2.8 Bn from the previous month. The increase can be attributed to global bond issuance, inflows into bonds, and SRBI.
- Inflows in capital inflows may be unsustainable given the uncertainty over the Fed rate outlook, as would be inflows from trade surplus considering the outlook of metal prices.
- Global bond issuance and SRBI are more sustainable drivers of FX reserves. SRBI is drawing foreign investors back, but it is costly as BI needs to pay investors higher yields for short-term instruments while buying longer-dated SBN at a premium.
- There is still a chance for another 25 – 50 bps hike, considering the ~1% gap between the BI Rate and SRBI. However, it will still be decided on a month-to-month basis.
