Bank Indonesia (BI) left rates at 6.0% at its October meeting, in line with expectations, after cutting 25bp last month. With meetings every month, it has the flexibility to wait and see the impact of key upcoming events, especially on the rupiah. These include Sunday’s inauguration of the new Indonesian president, and November’s US election and Fed meeting. HSBC expects BI to cut 25bp again on November 20. 

• HSBC is forecasting “BI to resume easing from the next meeting, with a 25bp in rate cuts in November, December and 1Q25, taking the policy rate to 5.25% by March 2025.”
• BI kept its key forecasts unchanged in October. “Growth is forecast at 4.7-5.5% in 2024 (HSBC: 5%). Inflation is forecast at 1.5-3.5% in 2024 (HSBC: 2.4%). And the c/a deficit is forecast at 0.1-0.9% of GDP in 2024 (HSBC: 0.8%).”
• “Governor Perry noted that IDR stability will remain an area of focus at a time of increased global uncertainties. And on that front, we believe there are risks that exchange rate markets will remain volatile in the short run, with markets repricing Fed cuts recently, continued geopolitical developments, and the upcoming US elections.”
• HSBC believes that BI will resume easing in November due to “sluggish growth”, “low inflation”, “improved external balances” and “rate cuts globally”.
• “BI expects a 25bp Fed rate cut in both November and December. Thereafter it expects 3-4 Fed rate cuts in 2025. Having said this, BI noted that it also considers not just US policy rates, but also UST levels in its monetary policy decisions.”