Analyst Who Called Indonesia’s Rate Increases Sees One More Hike

Claire Jiao and Grace Sihombing
·3 min read

(Bloomberg) -- The only analyst who accurately predicted both of Bank Indonesia’s most recent interest-rate increases honed his forecasting skills in a newsroom, not a trading room — and he expects one more hike by year-end.

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Before Satria Sambijantoro, 34, became the head of research at PT Bahana Sekuritas, he was a reporter in Indonesia’s national broadsheet The Jakarta Post — a career move that brought his mother to tears after he graduated with an economics degree.

“She always prayed that I would work in Bank Indonesia,” he said. “Maybe her prayers weren’t specific enough because I did end up working in Bank Indonesia, but as a journalist.”

However, it was his four years covering the central bank’s media briefings and getting to know its officials — including a then-Deputy Governor Perry Warjiyo — that gave him a unique view of Indonesia’s monetary policymaking. He was the only one in a Bloomberg poll of 31 economists who predicted the October rate hike. Last month, he was one out of 11 analysts who correctly penciled in another increase.

“Governor Perry is dovish at heart but ultimately pragmatic. He’s not afraid to do what needs to be done to stabilize the rupiah,” Sambijantoro said, pointing out that Warjiyo kicked off his stint as central bank chief in 2018 with 100 basis points in rate hikes over two months to stem a currency rout.

Sambijantoro expects one more 25-basis point rate hike to take the BI-Rate to 6.5%, a fresh high for the benchmark introduced in 2016. That’s counter to Warjiyo’s comments earlier this month that the tightening cycle is likely done, and an example of how Sambijantoro has earned the moniker “Brave Boy” in some journalist circles.

“BI will likely want to preserve its bullets and take an opportunistic rate hike possibly in the next two months,” Sambijantoro said, even as he joins 35 other analysts in predicting BI to hold on Wednesday.

Unusual Indicators

His contrarian view requires him to look past public pronouncements even from the governor himself, as well as tracking unusual indicators like palm oil output to chart Indonesia’s interest-rate path.

Bank Indonesia took markets by surprise when it delivered quarter-point rate hikes each in October and April. In both instances, Warjiyo had said weeks prior that the benchmark BI-Rate would be kept on hold, and even signaled its next move would likely be a cut.

This time, weakness in Asian currencies including the rupiah may prompt BI to tighten once again, especially as China could seek to devalue the yuan to offset the impact of US tariffs on its exports. Meanwhile the US’s expanded debt borrowing ahead of elections could worsen ongoing uncertainty over the Federal Reserve’s rate path, he said.

Sambijantoro is also watching the palm oil sector as one of the biggest suppliers of dollars in Indonesia as exporters often need to convert their foreign earnings to rupiah for workers’ wages. Higher output in Malaysia and Indonesia could mean lower palm oil prices and weaker inflows of the greenback. In addition, rising crude oil prices could mean more dollar demand for fuel imports.

“Policymaking is more of an art than a science,” Sambijantoro said, quoting former BI chief Darmin Nasution. Market sentiment and Warjiyo’s track record of swift action can’t be calculated by models, he added.

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