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Bank Indonesia delivers surprise cut to revive shrinking economy
Bank Indonesia trimmed its benchmark seven-day reverse repo rate by 25 basis points to 3.75 percent, the lowest since the policy rate was introduced in 2016.
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Bank Indonesia Governor Perry Warjiyo talks during a livestreamed press briefing after the monthly board of governors meeting on June 18. (Courtesy of Bank Indonesia (BI)/-)
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n a surprise move, Bank Indonesia (BI) decided on Thursday to cut its benchmark interest rate for the fifth time this year to revive the shrinking economy while reiterating its commitment to maintaining accommodative monetary policy going forward.
The central bank trimmed its benchmark seven-day reverse repo rate by 25 basis points (bps) to 3.75 percent, the lowest since the policy rate was introduced in 2016, and also cut the deposit facility and lending facility rates by a quarter of a percent to 3 and 4.5 percent respectively, following its two-day policy meeting.
The move was projected by only eight of 22 economists polled by Reuters.
“This decision took into account the low inflation expectation [and] maintained external stability and further measures needed to support the national economic recovery,” BI Governor Perry Warjiyo told reporters in a virtual press briefing.
BI’s monetary policy was loose, he went on to say, as reflected not only in the low interest rate but also the liquidity expansion through quantitative easing carried out by the central bank.
“Going forward, Bank Indonesia will keep on monitoring economic and global financial market developments as well as the spread of COVID-19 and its impact on Indonesia’s economic prospects in determining further policies needed to accelerate the national economic recovery program,” Perry stressed.
The Jakarta Composite Index (JCI) gained 0.66 percent to 5,594.06 on Thursday following the decision while the rupiah weakened 0.6 percent to Rp 14,155 against the United States dollar.
