By Gayatri Suroyo and Stefanno Sulaiman
JAKARTA (Reuters) – Indonesia’s central bank unexpectedly cut policy rates on Wednesday, resuming its monetary easing aimed at propping up growth in Southeast Asia’s largest economy despite financial market volatility that has weakened the currency.
Bank Indonesia (BI) cut the benchmark 7-day reverse repurchase rate by 25 basis points to 5.75%, its first cut since September.
All 30 economists polled by Reuters had expected no change in rates, citing the pressure on the rupiah.
The bank also trimmed its deposit facility rate and lending facility rate by 25 basis points each to 5.00% and 6.50%, respectively.
“This is the timing to lower rates so we can create a better growth story,” BI Governor Perry Warjiyo said after announcing the surprise cut. He said the decision was in line with expectations of low inflation in 2025 and 2026. “Going forward, BI will continue to direct monetary policy to maintain inflation within its target and the exchange rate in line with fundamentals, while still observing the space to help drive economic growth,” Warjiyo said.
BI on Wednesday said economic growth in 2024 may come in slightly below the midpoint of its forecast range of 4.7%-5.5%. BI also lowered its growth outlook for 2025 to 4.7%-5.5% from a previous estimate of 4.8%-5.6%.
The central bank had cut interest rates for the first time in more than three years in September, but had then held policy steady at subsequent meetings in 2024 to anchor the rupiah, which has been under pressure amid uncertainty about U.S. policy under President-elect Donald Trump.
The rupiah slid to 16,325 per dollar after the rate cut, its lowest since early July, while the benchmark stock index rallied to be up 1.5% gain as of 0753 GMT.
“The uncertainties were great in the past months. This month, there are still uncertainties but we can already measure them,” Warjiyo said when asked about cutting rates while the rupiah was under pressure.
Inflation has been moderate in Southeast Asia’s largest economy, with December’s annual rate of 1.57% close to the bottom end of BI’s 1.5% to 3.5% target range.
(Reporting by Gayatri Suroyo, Stefanno Sulaiman, Fransiska Nangoy and Ananda Teresia; Editing by John Mair)
Comments