Surprise interest rate cut from Indonesia | Interest Rate News

Indonesia’s central bank unexpectedly cut interest rates for the first time in more than three years, ahead of a stronger rupiah and an expected US rate cut.

Hurriyet.com.tr / Economy Service

Bank Indonesia cut its seven-day reverse repo rate by 25 basis points to six percent, the first move since the beginning of 2021. The other two main interest rates were also cut by 25 basis points.

“The direction of the Federal Funds Rate is becoming clearer and the rupiah is relatively stable, even strengthening. These two factors are why we are lowering the interest rate now,” bank governor Perry Warjiyo told reporters.

The central bank had steadily increased borrowing costs to maintain the value of the rupee amid global economic uncertainty and rising inflation.

However, Perry said that price increases have slowed down and that the interest rate cut decision coincides with the bank’s prediction that inflation will remain low in 2024 and 2025.

“Further cuts are likely as inflation comes under control and the rupee recovers against the US dollar,” said Gareth Leather, senior Asia economist at Capital Economics.

Southeast Asia’s largest economy is expected to grow steadily over the next two years, thanks to domestic consumption and investment, despite weak exports, the World Bank said in a June report.

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