Monetary Easing Cycle Continues: Bank Indonesia Cuts Benchmark Interest Rate to 5.25%
The central bank of Indonesia (Bank Indonesia) showed that it is willing to lend a helping hand to try and boost Indonesia’s economic growth by cutting its benchmark interest rate again. On 19 September 2019 – the last day of its two-day monthly policy meeting – Bank Indonesia cut its BI 7-day reverse repo rate by 25 basis points (bps) to 5.25 percent, while the deposit facility and lending facility rates were lowered (by 25 bps) to 4.50 percent and 6.00 percent, respectively.
In a statement Bank Indonesia stated that low inflation, a stable rupiah, and an outlook for a manageable current account deficit are factors that allowed the latest rate cut. It added that returns on domestic financial investment assets remain attractive after the cut, while monetary easing is also a pre-emptive measure to stimulate Indonesia’s economic growth momentum against a backdrop of global economic moderation. Not unimportantly the US Federal Reserve had cut interest rates by a quarter percentage point (for the second time since July 2019) one day earlier in an attempt to keep the US economy strong amid troubled international conditions.
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