The Jakarta Post
Bank Indonesia has reduced its key interest rate in a move that signals an end to the tightening cycle that began last year.
Following a two-day Board of Governors meeting, the central bank cut its benchmark rate, the seven-day reverse repo rate, by 25 basis points (bps) to 5.75 percent on Thursday. Lending and deposit facility rates were also slashed by 25 bps to 6.5 percent and 5 percent, respectively.
BI Governor Perry Warjiyo said the decision was taken amid low inflation and the need to boost domestic growth, while external pressures had eased.
“The decision [to cut rates] was made in line with expected low inflation and the need to encourage the momentum for economic growth amid the easing of global financial uncertainties and manageable external stability,” said Perry in Jakarta on Thursday.
The central banker added that BI still saw room for further monetary policy easing going forward, considering low inflation and the need to boost GDP growth, hinting at an end to the 175-bps tightening cycle undertaken by the central bank from May to November last year to stabilize Indonesia’s current account balance.
“Our monetary policy will be accommodative going forward,” said Perry. “The accommodative monetary policy could mean that we further ease liquidity, or it could mean bringing down the interest rate.”
Perry added that the decision to slash the policy rate was based on the assumption that the United States Federal Reserve would bring down its policy rate one time in 2019. (bbn)