Bank Indonesia (BI) blamed a swearing-in ceremony at the nation’s financial regulator for the delay of its interest rate announcement until almost midnight in Jakarta on Thursday.
The timing of the decision left analysts puzzled and spurred speculation the central bank might have been waiting for European Central Bank (ECB) President Mario Draghi’s monetary policy press conference that came hours beforehand.
The Indonesian authority held its benchmark rate at 4.75 percent, as predicted by all 19 economists surveyed by Bloomberg. It last cut the rate in October last year.
Bank Indonesia spokesman Arbonas Hutabarat yesterday said the meeting was delayed because several central bank board members had attended a ceremony at the Financial Services Authority (OJK) earlier in the afternoon.
There was “no linkage to the ECB,” he said.
There is no specific time for Bank Indonesia’s monthly press conference where the rate decision is disclosed, but in recent months it had come before 6pm.
“Why the decision took so long is unclear — the decision was exactly what everyone had expected,” said Gareth Leather, a senior Asia economist at Capital Economics Ltd in London. “The policy statement offers no clues to why the meeting dragged on so late into the evening.”
Bank Indonesia cut interest rates six times last year and eased reserve limits on lenders this month to help spur lending and support economic expansion.
The monetary authority on Thursday said that inflation — which has ticked up recently because of rising food and electricity costs — should remain within its 3 to 5 percent target band, while the rupiah has stabilized.
Indonesia’s decision came after dovish comments from Draghi, which may continue to underpin foreign inflows into emerging markets, like Indonesia.
The ECB might not make a decision on tapering its bond-buying program until October, eurozone officials familiar with the matter said.
Draghi on Thursday tried to play down talk the bank is preparing to wind in its 60 billion euros (US$69 billion) a month asset-buying scheme, saying inflation remained tepid.
However, he added: “We simply said that our discussions should take place in the fall, or in autumn, since we are in Europe.”
The timing of Bank Indonesia’s rate announcement after the ECB’s “showed BI’s concerns regarding external risks emanating from policy normalization amongst the major central banks,” Merrill Lynch Asia Pacific Ltd economist Mohamed Faiz Nagutha said in a note.
Europe-based funds account for “almost half” of the foreign holdings of Indonesian government bonds, PT Bank Danamon economists Wisnu Wardana and Anton Hendranata wrote in a note yesterday.
“We have reason to believe that there may be greater impact to local bond and currency when the ECB starts its quantitative tightening,” they wrote.
Foreign funds have sold a net 6.4 trillion rupiah (US$481 million) of Indonesian debt so far this month.
The rupiah has gained 1.1 percent this year and was up 0.2 percent to 13,314 per US dollar as of 2:41pm yesterday in Jakarta.
The Indonesian economy is expected to expand at a slightly faster pace of 5.1 percent in the second quarter, Bank Indonesia Assistant Governor Dody Waluyo told reporters in Jakarta.
There are early signs that retail sales growth is improving, he said.
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