Bank Indonesia is poised to keep its key interest rate steady for the sixth consecutive meeting on March 17th. A Reuters poll indicates a majority of economists expect the benchmark seven-day reverse repurchase rate to remain at 4.75%. This decision comes as renewed pressure on the Indonesian rupiah, driven by the Middle East conflict, restricts the central bank's ability to implement policy easing.
Previously, BI signaled support for economic growth. However, a recent bout of rupiah weakness has forced the bank to prioritize currency stability. Investor concerns regarding fiscal credibility and central bank independence have also contributed to capital outflows, further impacting sentiment.
The rupiah hit a record low recently and has seen a decline this year, effectively closing the door on a rate cut at the upcoming meeting. Economists polled largely anticipate the rate to stay at 4.75%, with overnight deposit and lending facility rates also expected to hold steady.
While a pause is certain for this meeting, a significant portion of economists foresee rate cuts in the next quarter. This outlook shifts from previous polls, with expectations for rate cuts now delayed, primarily due to the rupiah's weakness constraining the central bank's options.