- Fed lowered the FFR by 25 bps, but with a much more hawkish outlook (only 2 cuts next year) that has led to renewed risk-off positioning in the market.
- Accordingly, BI kept its benchmark rate at 6.00% amid concerns over IDR depreciation and the limited inflows (even to SRBI) in recent weeks.
- BI’s strategy to keep issuing SRBI while buying IDR 150 Tn of SBN in the secondary market next year could be quite costly and limit its maneuvering room going forward.
- Amid the new administration’s expansive fiscal goals, BI is facing a dilemma between keeping a strong IDR and strong private borrowing.
- Very high real BI Rate suggests that BI is favoring the former goal, but further liquidity tightness may eventually necessitate a more pragmatic, balanced approach.
