For the second consecutive month the central bank of Indonesia (Bank Indonesia) cut its benchmark interest rate (the BI seven-day reverse repo rate). And, again, the rate was cut by 25 basis points (bps). It means that the key rate is now at the level of 4.50 percent.
The central bank mentioned in a statement that the lower rate is an effort to stimulate economic activity. This is needed as Indonesia’s economic growth could plunge to a pace we have not seen since the aftermath of the Asian Financial Crisis some two decades ago.
Meanwhile, at the two-day policy meeting on 18-19 March 2020 Bank Indonesia also cut its deposit facility and lending facility rates – both by 25 bps as well – to 3.75 percent and 5.25 percent, respectively.
The latest rate cut came at a time when Indonesian assets were under severe pressure due to the COVID-19 pandemic. With the rupiah weakening to levels not seen since the Asian Financial Crisis in the late 1990s and the benchmark stock index (the Jakarta Composite Index) plunging more than 30 percent since the start of the year, Bank Indonesia decided to come with a range of policy measures to calm markets.
This article discusses the following:
• The policy measures that have been announced by Bank Indonesia in an effort to curtail the negative impact on the economy and financial sector.
• Indonesia's economic/financial condition.
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Poll Indonesia Investments:
According to you at what pace will the Indonesian economy grow in 2020?
Voting possible: -
- Lower than 0.0% (26.8%)
- Higher than 2.0% (17.9%)
- 0.5% - 1.0% (15.9%)
- 0.0% - 0.5% (15.8%)
- 1.0% - 1.5% (11.8%)
- 1.5% - 2.0% (11.8%)
Total amount of votes: 1025