HONG KONG. Morgan Stanley predicts that Bank Indonesia will cut interest rates up to four times at the end of this year to spur economic growth.
Quoting Bloomberg on Wednesday (17/7), Head of Asia-ex Japan FX and rates strategy at Morgan Stanley Hong Kong Min Dai said that the central bank had room to cut its reference rate to 5% due to lower US treasury yields and lower world oil prices.
Based on the median estimate of economists surveyed by Bloomberg, BI will cut interest rates to 5.5% by the end of December 2019.
"We recognize that it is beyond consensus," Dai said in response to his estimates. "While BI raised interest rates last year because US Treasury yields and oil prices rose, both factors did not occur in the market this year. This provides a very good opportunity for BI to do a little easing."
Morgan Stanley sees BI will reduce its reference rate to 5% after raising it six times in 2018.
According to Dai, cutting interest rates in Indonesia will help stabilize the currency and allow state bonds to extend its recent rally. (AM/AR)