Indonesia central bank delivers surprise rate cut to boost growth
[JAKARTA] Indonesia’s central bank delivered another surprise interest rate cut on Wednesday (Sep 17), its sixth cut since it kicked off an easing cycle in September last year, saying economic growth needed to be strengthened.
Bank Indonesia trimmed the benchmark 7-day reverse repurchase rate by 25 basis points to 4.75%, the lowest since late 2022. All 31 economists surveyed by Reuters had expected no change.
The bank also cut its overnight deposit facility rate by 50 basis points and its lending facility rate by 25 basis points to 3.75% and 5.50%, respectively.
Governor Perry Warjiyo reiterated at Wednesday’s press conference that BI would continue to assess the room for further cuts in an effort to lift economic growth. BI has had to balance the need to keep the rupiah currency stable and the need to support growth during the easing cycle.
BI has now cut its main interest rate by a total of 150 basis points since September last year.
Markets have been unsettled by two weeks of protests and unrest across many cities from late August and then last week’s abrupt sacking of respected finance minister Sri Mulyani Indrawati.
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There have also been concerns about the central bank’s independence following a “burden sharing” deal that will see BI help fund state programmes.
And parliament is discussing changes that could strengthen the requirement for BI to support growth and allow parliament to evaluate board members and recommend their removal to the president.
South-east Asia’s largest economy grew 5.1% in the second quarter from a year earlier, the fastest pace in two years, but new finance minister Purbaya Yudhi Sadewa has said there were signs of slowing in the third quarter.
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Earlier this week, the government unveiled a stimulus package worth nearly US$1 billion for the fourth quarter, including food handouts and an infrastructure building programme that could create some jobs.
Purbaya last week criticised BI for keeping liquidity conditions too tight, and moved more than US$12 billion of government funds from the central bank to commercial banks to be used for loans.
Warjiyo emphasised on Wednesday that the banking system has ample liquidity to support loan distribution and economic growth, and urged banks to lower their interest rates. REUTERS
