Indonesia money supply jumps by 20.9% in May
Rate cuts unlikely until 2013, says OCBC.
OCBC said that the multi-year record high M2 money supply growth for May is an interesting figure to keep in mind ahead of the BI rate decision later today. "While it is widely anticipated that the central bank will continue to hold rates unchanged today, and possibly for the rest of the year, we remain of the view that the likelihood for further rate cuts into 2013 is small, barring another global recession."
Here's more from OCBC:
As it is, the 20.9% yoy M2 money supply growth seen in May is a clear indication that underlying inflationary pressures remain prevalent in the economy, driven by a strong loan growth amidst the still robust domestic demand. Even if excess capacity in the economy is arguably still relatively high, we doubt that the current situation would be sustainable into the medium-term, especially noting the fact that authorities have continued to drive credit growth in the economy. We now expect inflation to average closer to the bottom half of the 5.0-5.5% range in 2012 but look for it to return to 6.3-6.5% in 2013.
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