A slim majority of economists expect Bank Indonesia to keep interest rates on hold this year, as it aims to support growth while averting a resurgence in inflation, a Reuters poll showed. The poll of 23 economists, conducted after the central bank held rates at 5.75 percent on Thursday, showed that respondents remained deeply divided on what the next move might be.
While the median forecasts of the poll showed interest rates remaining at a record low of 5.75 percent until the end of this year, seven of the 20 respondents see rates increase - one to as high as 6.50 percent this year - while five see rate cuts.
Of the eight economists who forecast rates on hold this year, some said there was a downward bias to their predictions given BI's aim to support the economy, while others expect their forecasts to be raised if inflation remained persistently high. Three economists didn't give year-end forecasts. "If it becomes clear to them (BI) that we are not talking about a temporary spike in inflation then they will realise they would have to change course in monetary policy and therefore begin to hike rates," said Leif Eskesen, chief economist for ASEAN and India at HSBC.