Indonesia, Philippines Set to Keep Rates Steady: Decision Guide
A motorcyclist passes an entrance to the Bangko Sentral ng Pilipinas ahead of an interest rate news conference in Manila, the Philippines. (Photographer: Veejay Villafranca/Bloomberg)

Indonesia, Philippines Set to Keep Rates Steady: Decision Guide

Indonesia and the Philippines are expected to leave interest rates unchanged this week, letting previous reductions work their way through coronavirus-battered economies.

Central banks in both countries have been among Asia’s most aggressive rate-cutters this year as their economies suffer their deepest contractions in decades. Policy makers have also been using targeted tools, like reducing lenders’ reserve ratios, and expanding unconventional policies, including buying government bonds, to support growth.

“I expect both to keep policy rates unchanged, but their forward guidance will be watched more closely,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore.

Indonesia, Philippines Set to Keep Rates Steady: Decision Guide

Bangko Sentral ng Pilipinas “will still sound more dovish and signal it’s ready to act,” he said. “In contrast, Bank Indonesia should remain steadfast in its goal of rupiah stability and hence, with still-elevated external uncertainty, we expect it to remain on hold for the rest of the year.”

Here’s what to watch out for in this week’s decisions:


After 100 basis points of cuts so far this year, Bank Indonesia will probably keep the seven-day reverse repurchase rate at 4% on Wednesday, according to 20 of 25 economists surveyed by Bloomberg. The others expect a 25 basis-point cut.

Policy makers “need not ease too much for now,” said Enrico Tanuwidjaja, a Jakarta-based economist at PT Bank UOB Indonesia. They “should keep the current interest-rate differential to attract foreign capital inflow and maintain the stability of rupiah.”

Indonesia, Philippines Set to Keep Rates Steady: Decision Guide

Asia’s worst-performing currency this year, the rupiah has lost 6.6% against the dollar since 2020 began.

Analysts are watching closely for signals that Governor Perry Warjiyo may extend the central bank’s bond-purchasing plans after it took unprecedented steps this year by agreeing to buy $27 billion of securities directly from the government.

“BI may focus on quantitative easing to support the government’s budget financing,” said Chidu Narayanan, an economist at Standard Chartered Plc in Singapore.


After a total of 175 basis points in rate reductions this year, the BSP will “allow previous cuts to flow into real activity,” said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore.

Seventeen of 18 analysts surveyed by Bloomberg predict the BSP will keep the overnight reverse repurchase rate at 2.25% on Thursday. The other one expects a half-point cut.

If demand remains weak, policy makers may deploy “more supportive policies” in coming months, including a cut in banks’ reserve requirement ratios, Victorino said.

Indonesia, Philippines Set to Keep Rates Steady: Decision Guide

After Governor Benjamin Diokno recently signaled there’s no need for more rate cuts in the near term, analysts are on the lookout for any comments on BSP’s conditions for using other measures in its toolkit. BSP earlier signed a debt-repurchase agreement with the government, opened a small buying window in the secondary bond market and loosened lending rules.

©2020 Bloomberg L.P.

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