Indonesia and China
October 20, 2022
Bank Indonesia’s seven-day reverse repo rate was lifted by an expected 50 basis points to a 32-month high of 4.75%. There had been two earlier hikes this year of 25 basis points in August and 50 bps in September. At 4.75%, the rate is just 25 basis points below its pre-pandemic level of 5.0%. Indonesian inflation hovered just marginally under 6.0% in September, double the mid-point of the official target range of 2-4%.
The People’s Bank of China did not cut its one-year and 5-year loan facility rates of 3.65% and 4.30% further at this time. The rates were last reduced in August and since December 2021 have been lowered by 20 and 35 basis points, respectively. Meanwhile, the mystery of why a scheduled slew of Chinese economic data releases this week have not been reported continues. In the absence of official explanation for the delay, markets are assuming the worst, namely that Chinese economic growth has slowed considerably faster than presumed and that whatever data eventually do get reported are not to be believed. The hesitation of central bank officials to cut interest rates again may reflect weakness in the yuan that they don’t wish to encourage.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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