(Bloomberg) -- Despite recent hawkish signals, Bank Indonesia may cut interest rates as soon as this month, triggering a rally in the country’s debt, according to Bank of America Corp.

“Indonesia, if not December, at some point early next year, will be the first one to cut rates in this region,” Shah Jahan Abu Thahir, head of global markets for Southeast Asia, said in an interview. “Indonesia definitely has a scope to cut policy rates” given the nation’s current “high real interest rates.”

Abu Thahir’s dovish view comes even as BI itself signaled last week it may extend its interest rate pause. The central bank held its policy rate steady at 6% in November after a surprise increase in the previous month as it sought to support the rupiah amid global uncertainties and rising oil prices.

However, the rupiah jumped nearly 2.5% in November to post its first monthly gain since April as weak US data and dovish comments from Fed officials dragged the dollar to the lowest in nearly four months. Yields on 10-year rupiah government debt slid more than 50 basis points since Oct. 31 to 6.59% as of Wednesday due to a rally in Treasuries. 

There’s scope for Indonesia’s benchmark yields to slump to as low as 5.25% next year as BI eases policy, according to Abu Thahir, a 16-year veteran of BofA. That would be the lowest yield since 2013.

Foreigners have already started piling up on rupiah bonds on bets the Fed may be done with its most-aggressive tightening cycles in decades. Global funds bought a net $1.5 billion of rupiah sovereign notes in November, the most since January, according to data compiled by Bloomberg. That keeps Indonesia on track for its first year of foreign inflow in four years, the data show.

Bank Indonesia’s next policy decision is due Dec. 21 and analysts at Fitch Solutions’ BMI and Pantheon Macroeconomics expect the central bank to cut its key rate by 25 basis points.

Assuming “the market narrative is correct — the dollar starts to weaken, the Fed will start cutting rates — then I think assets like Indonesia’s will do well,” Abu Thahir said.

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