INDONESIA: VIEW: ING Sees Another 75bp Of Easing, Risk Of More
Bank Indonesia (BI) left rates at 5.5% as was generally expected, although some analysts were forecasting a 25bp cut. Any further easing will continue to be dependent on rupiah stability and the global economy but it maintained an easing bias as it believes economic and lending growth require support. Heightened geopolitical and trade uncertainties are keeping BI cautious as the chance of risk off moves remains elevated. ING believes that since real rates are around 4%, BI will likely ease another 75bp by Q1 2026 but risks are skewed to the upside due to domestic policy and global trade uncertainty.
- ING notes that “while the sustainability of large inflows into Indonesian bonds remains uncertain due to persistent fiscal risks, the broader USD weakening trend should offer support. In this context, BI may use windows of currency strength to cut rates more opportunistically.”
- ING believes that “the macro environment remains well-positioned for BI to cut rates later this year to support economic growth, following a slowdown in first quarter GDP to 4.9% year-on-year, down from 5.0% in the previous quarter. The deceleration was primarily driven by weaker investment activity.”
- “To cushion the economy, the government has rolled out a fiscal stimulus package worth US$1.5bn, including doubled wage subsidies, transport fare discounts, and direct cash and food assistance. While these measures may help stabilise near-term consumption, they are unlikely to spur a meaningful recovery in capital expenditure.”
- “While higher crude oil prices are a risk to CPI inflation, the magnitude of impact is relatively low when compared to the rest of the region. A 15% increase in oil prices could add about 0.2% to CPI inflation, leaving enough room still within BI’s target of 1.5-3.5%.”
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
RBA: Global Uncertainty Drives Forecasts Lower
The RBA cut rates 25bp to 3.85%, the lowest in two years, as was widely expected. The impact of current global uncertainty on economic decisions contributed to downward revisions to staff forecasts for GDP growth, inflation and employment but the outlook is significantly unclear. These downward adjustments, especially those bringing inflation closer to the band mid-point, gave the Board room to cut rates for a second time this year and opens the possibility of further easing depending on data and global developments but the RBA “remains cautious”.
- The decision to cut rates was made because Q1 trimmed mean CPI fell below the top of the 2-3% band, downward revisions to global growth and thus Australia’s resulted in lower employment gains and brought inflation closer to the band mid-point, of heightened uncertainty and a slower consumption recovery.
- The board noted that inflation risks were now “balanced” after being “on both sides” in April.
- Market OCR pricing used in forecasting was 20-30bp lower than in February and still drove a 0.1pp downward revision to underlying inflation bringing it to 2.6% across the horizon. Headline was adjusted to reflect not only softer growth but changes to the government’s electricity rebate but it now doesn’t exceed 3.0% helped by a materially lower oil price assumption.
- GDP growth was revised down 0.3pp in Q4 2025 to 2.1% as consumption is now forecast to grow 1.9% down from 2.6%. Business investment and exports are also lower while public demand and dwelling investment are now forecast to be higher. End-2026 GDP was little changed at 2.2% with stronger private consumption offsetting weaker public demand.
- The unemployment rate is forecast to peak 0.1pp higher at 4.3%, while employment growth was revised down 0.7pp to 2.1% in Q2 2025 (April +2.7% y/y) and -0.6pp to 1.4% y/y in Q4, but it reiterated that the labour market remains tight. Wages growth was revised 0.1pp lower across the horizon and productivity slightly higher.
EURGBP TECHS: Trading At Its Recent Lows
- RES 4: 0.8768 High Nov 20 ‘23
- RES 3: 0.8624/0.8738 High Apr 21/ High Apr 11 and the bull trigger
- RES 2: 0.8541/8557 High May 2 / High Apr 28
- RES 1: 0.8457 50-day EMA
- PRICE: 0.8413 @ 06:31 BST May 20
- SUP 1: 0.8394 Low May 16
- SUP 2: 0.8359 1.236 proj of the Apr 11 - 16 - 21 price swing
- SUP 3: 0.8316 Low Mar 28 and a key support
- SUP 4: 0.8277 1.618 proj of the Apr 11 - 16 - 21 price swing
EURGBP is trading at its recent lows. A bearish theme remains in play. The cross has recently cleared 0.8457, the 50-day EMA, signalling scope for a continuation lower near-term. The 0.8400 handle has been pierced, a continuation lower would open 0.8359, a Fibonacci projection. Key near-term resistance to watch is 0.8541, the May 2 high. A break of this hurdle is required to signal a potential reversal.
SCHATZ TECHS: (M5) Monitoring Resistance
- RES 4: 107.775 High Apr 7 and the bull trigger
- RES 3: 107.600 High Apr 30
- RES 2: 107.550 High May 7
- RES 1: 107.320/335 20-day EMA / High May 12
- PRICE: 107.280 @ 06:10 BST May 20
- SUP 1: 107.175/070 Low May 19 / 13 and the bear trigger
- SUP 2: 106.965 Low Apr 9 and a key support
- SUP 3: 106.928 61.8% retracement of the Mar 6 - Apr 7 bull cycle
- SUP 4: 106.830 Low Mar 27
Despite recent gains, a bearish theme in Schatz futures remains intact for now. A resumption of the bear leg would signal scope for an extension towards the next key support at 106.965, the Apr 9 low. The bear trigger has been defined at 107.070, the May 13 low. On the upside, resistance to watch is 107.335, the May 12 high. Clearance of this hurdle would signal a potential reversal. This would open 107.550, the May 7 high.
