JAKARTA (TheInsiderStories) – After being shaken by of trade wars issues and U.S’s Federal interest rates (Fed rate) last week, now investors focused on Indonesia, China and Bank of England monetary stance, current account deficit will announce by Statistic Indonesia, also regional election.
Last week Bank Indonesia (BI) cancelled to announce its seven days reverse repo rate (BI – 7DRR) without give any explanation. The central bank plans to announce the board governor decisions on the monetary stance on Thursday (28/06).
Several analyst and economist was asked BI not to be too aggressive to raise interest rates as domestic economic conditions remain stable. BI itself has sent a signal that another hike of the benchmark rate is on the table at the next meeting.
Last month, the central bank’s board of governor raised interest rates for the first time in four years to stem a depreciation of the currency.The latest decision brought the BI-7DRR to 4.75 percent, while the lending facility rate was raised to 5.50 percent and the deposit facility rate to 4.00 percent.
From the global side, People Bank of China (PBoC) raised the daily fixing rate by 50 basis points amid heightened worries about the China – Unite States (U.S) trade war. The Bank also will release 700 billion yuan (equivalent to $108 billion) in liquidity aims to accelerate the pace of exchange of corporate debt into stocks and spur lending to smaller companies.
The combined 700 billion yuan liquidity injections exceeded market expectations that were estimated at just 400 billion yuan. In the latest bank reserve ratio (RRR) cuts targeted in April, 400 billion yuan of net liquidity was released.
The third time reserve cutback by the central bank this year has been widely anticipated by investors amid concerns over market liquidity and potential economic bottlenecks from trade war with the U.S.
The central bank said that the latest cut in the RRR currently 16 percent for large bank and 14 percent for small banks and will take effect on July 5. The PBoC also said that the cuts would release about 500 billion yuan from five state-owned large banks and 12 private commercial banks.
The central banks are encouraged to use the money to do debt-for-equity swaps. The latest RRR cuts will also release about 200 billion yuan in funding of medium and small banks to increase lending to small credit-deficient businesses, the PBOC said.
Sunday’s announcement came following the worst weekly decline in China’s stock market since early February as fears of a full-fledged trade war with the U.S weighed. China’s Yuan on Friday (22/06) also fell to the lowest against the dollar in more than five months.
Whike, the Bank of England does not raise its benchmark interest rate at its June 2018 meeting, and will consider hoisting the Rate at its August 2018 meeting.
Back to domestic side, the sluggish production activity amid flooding imports of consumer goods and raw materials ahead of Ramadan as well as major export commodity exports is estimating will overshadowed the trade balance in May 2018. Indonesia’s current account deficit (CAD) in April 2018 recorded a deficit of US$1.63 billion, driven by rising imports of consumer goods and oil and gas.
The trade balance position in January-April 2018 experienced a deficit of $1.31 billion. From that position, the oil and gas deficit suffered a deficit of $3.8 billion. Imports throughout April 2018 reached $16.09 billion, an increase of 11.38 percent compared to March 2018.
Exports in April 2018 decreased 7.19 percent to $14.47 billion compared to the previous month, with details of non-oil exports of $13.28 billion and oil and gas $1.19 billion. The overall export figure fell 7.19 percent compared to March 2018, but up 9.01 percent compared with April 2017.
For today, Chief Economist PT Trimegah Sekuritas Tbk (IDX: TRIM) Fakhrul Fulvian optimist the trade balance will surplus around of $50 million driven by a drop in imports, which rose very high in April.