Indonesia Unexpectedly Cuts Interest Rate
(RTTNews) - Indonesia's central bank eased its monetary policy unexpectedly on Wednesday in order to bolster economic growth amid inflation remaining well within the target range.
The Bank Indonesia board, led by Governor Perry Warjiyo, decided to cut the BI rate by 25 basis points to 5.0 percent.
Accordingly, the deposit facility rate was lowered to 4.25 percent and the lending facility rate to 5.75 percent.
This was the fourth rate cut so far this year. The bank was anticipated to keep the rate unchanged at 5.25 percent.
The bank said the decision was consistent with expectations of persistently low inflation forecast, stable currency and the need to stimulate economic growth.
Going forward, the bank will continue to monitor the scope for interest rate cuts to support economic growth in line with the low inflation forecast while maintaining stability in the rupiah exchange rate, the bank said in a statement.
Citing better-than-expected growth in the second quarter, the bank projected the economy to grow above the midpoint of the 4.6-5.4 percent range in 2025.
ING economist Deepali Bhargava said today's decision suggests that the bank is taking advantage of periods of rupiah strength to ease policy without risking currency instability.
With inflation still below target and US Federal Reserve easing expected from September, the bank may opt to front-load further rate cuts to address growth concerns amid ongoing weakness in global trade and domestic consumption, Bhargava added.
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