Indonesia:BI pauses,for now

Bank Indonesia (BI) today left its 7-day reverse repo rate (RRP) unchanged at4.75%. The pause was widely expected, given the volatility of financial marketsfollowing the Fed's decision to lift interest rates overnight. But we think the centralbank could still deliver a little more easing in the coming months beforeconcluding the current easing cycle, given sluggish growth. We expect a 25bp cutin the 7-day RRP to 4.50% in 1Q17, with reserve requirement ratio (RRR) cuts alsoa possibility. CPI inflation will likely be at the low end of BI's 3-5% target rangeduring the quarter, and there should also be greater clarity over the US termstructure by then, providing the central bank scope and confidence to ease.