Goldman Revises Down Rupiah Forecast to 9,000 in Three Months

Goldman Sachs Group Inc. lowered its three-month forecast for Indonesia’s rupiah to 9,000 per dollar from 8,750, citing financial-market volatility. 

Bank Indonesia will boost its policy rate by 25 basis points to 6.75 percent when it meets on Feb. 4, according to a Goldman Sachs research report released today. Consumer prices in Southeast Asia’s largest economy rose 6.96 percent in December, the most in 20 months, according to official data. 

“We believe intensifying inflationary pressure is now the dominating factor for monetary policy,” Enoch Fung, a Hong Kong-based economist at Goldman Sachs, wrote in the report. “We expect to see more gyrations in financial markets at the early stage of the policy tightening cycle.” 

The rupiah gained 0.2 percent to 9.053 per dollar as of 10:44 a.m. in Jakarta. The currency has declined 0.8 percent this month after rallying 4.6 percent last year. 

Goldman also revised its six- and 12-month forecasts for the rupiah to 8,800 and 8,700, from 8,600 and 8,450 respectively. Bank Indonesia will boost its policy rate by 100 basis points in the first half and another 50 basis points in 2012, the report said. 

Inflation may accelerate to 7.5 percent in the first quarter and 7.7 percent in the second quarter, versus previous estimates of 6.4 percent and 6.2 percent respectively, the report said. Source: Bloomberg