- Inflation in Indonesia may continue to run higher in the next couple of months as the domestic economy enters the high-spending season of Ramadan and Lebaran (Eid). Thus, the narrowing real rate differentials may put the Rupiah under depreciation pressures.
- BI launched the FX term deposit for export proceeds (DHE) at an attractive rate. The policy would help to improve the domestic FX liquidity condition but at a cost that would be borne by BI alone.
- Interest payments on DHE FX term deposits would limit BI’s ability to generate profits. Dwindling profitability would not impact BI’s ability to fulfil its mandate, but the DHE policy’s costliness may discourage the central bank to maintain the market instrument over the longer term.
