Indonesia seen to cut rate twice this year amid US tariff talks
INDONESIA'S central bank is expected to resume monetary easing after holding its rate unchanged for three consecutive meetings, moving to bolster economic growth against the backdrop of rising tariffs and trade policy uncertainty.
Economists predicted a quarter-point reduction in Bank Indonesia's benchmark rate to 5.5% by the end of the second quarter, according to the latest Bloomberg survey. They see a further 25-basis point cut in the third quarter, which will lead the terminal rate to 5.25% toward the year-end.
Consumer inflation could also be more moderate than expected. The headline gauge is projected to be 1.8% for the second quarter, lower than the earlier forecast of 1.9%, which should pare down the full-year print to 2% from 2.1%.
The planned 32% US tariffs on Indonesian goods prompted economists to lower economic growth forecasts this year to 4.8% from 5% previously. 'Key downside risks to growth could stem from the implementation of the higher-band reciprocal tariff on Indonesia after the current 90-day pause', said Lloyd Chan, strategist at MUFG bank.
The Indonesian government is currently negotiating with Washington to avert the tariffs that are seen to hit the exports sector. In an early warning sign of the tariff fallout, a measure of Indonesian manufacturing activity fell to its lowest since 2021, with factories cutting production and jobs in April.
Indonesia has pledged to increase its energy and agriculture imports from the US, as well as increase cooperation for the supply of critical minerals in the trade talks. Still, the government underlined it will put forward national interests as the US pushes for Indonesia to deregulate investments and ease market access.
The Indonesian rupiah fell to an all-time low against the dollar last month, triggered by a selling spree in global financial assets as an impact of rising trade frictions around the globe. 'The rupiah, already near its lowest level since the Asian financial crisis, may come under additional pressure, and potentially require further intervention by Bank Indonesia,' said Ahmad Mobeen, senior economist at S&P Global Market Intelligence. –BLOOMBERG
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
2 hours ago
- The Star
Trump says China will supply rare earths in ‘done' trade deal
President Donald Trump says the US is 'getting a total of 55% tariffs, China is getting 10%' in a social media post. - Photo: Reuters WASHINGTON: US President Donald Trump said a trade framework with China has been completed, with Beijing supplying rare earths and magnets 'UP FRONT' and the US allowing Chinese students into its colleges and universities. The United States and China will maintain tariffs at their current, lower levels following negotiations between the two nations this week in London, Trump said on Wednesday (June 11). He said the deal is subject to final approval by him and Chinese President Xi Jinping. 'OUR DEAL WITH CHINA IS DONE, SUBJECT TO FINAL APPROVAL WITH PRESIDENT XI AND ME,' Trump posted on social media. 'WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%. RELATIONSHIP IS EXCELLENT!' A White House official said the agreement allows the US to charge a 55 per cent tariff on imported Chinese goods. This includes a 10 per cent baseline 'reciprocal' tariff, a 20 per cent tariff for fentanyl trafficking and a 25 per cent tariff reflecting pre-existing tariffs. China would charge a 10 per cent tariff on US imports, the official said. In a later post, Trump said Xi and he 'are going to work closely together to open up China to American Trade. This would be a great WIN for both countries!!!' His post suggested China may have to restart rare earth shipments before the US agrees to lower export controls on key technology. And his comments left doubt about whether Beijing could negotiate tariff rates even lower. 'FULL MAGNETS, AND ANY NECESSARY RARE EARTHS, WILL BE SUPPLIED, UP FRONT, BY CHINA. LIKEWISE, WE WILL PROVIDE TO CHINA WHAT WAS AGREED TO, INCLUDING CHINESE STUDENTS USING OUR COLLEGES AND UNIVERSITIES (WHICH HAS ALWAYS BEEN GOOD WITH ME!),' Trump said. US and Chinese officials said on June 10 they agreed on a framework to get their trade truce back on track and remove China's export restrictions on rare earths while offering little sign of a durable resolution to longstanding trade tensions. At the end of two days of intense negotiations in London, US Commerce Secretary Howard Lutnick told reporters the framework deal puts 'meat on the bones' of an agreement reached in May in Geneva to ease bilateral retaliatory tariffs that reached crushing triple-digit levels The Geneva deal faltered over China's curbs on critical minerals exports, prompting the Trump administration to respond with export controls of its own preventing shipments of semiconductor design software, aircraft and other goods to China. Trump's shifting tariff policies have roiled global markets, sparked congestion and confusion in major ports and cost companies tens of billions of dollars in lost sales and higher costs. - Reuters, Bloomberg
Malaysia Sun
6 hours ago
- Malaysia Sun
Interview: ASEAN eyes role as 4th largest economy through deeper regional integration, partnerships
JAKARTA, June 11 (Xinhua) -- As the Association of Southeast Asian Nations (ASEAN) advances its economic integration efforts, Indonesian economist Syafruddin Karimi of Andalas University said the region's ambition to become the world's fourth-largest economy is within reach. "ASEAN is currently entering a pivotal phase in its economic integration project," said Syafruddin in a recent interview with Xinhua. "With the spirit of the Kuala Lumpur Declaration adopted at the 46th ASEAN Summit, the region has reaffirmed its commitment to strengthening intra-regional cooperation and accelerating progress toward comprehensive economic integration." He emphasized that ASEAN has made "significant progress in recent years, particularly in the harmonization of trade standards, the acceleration of physical and digital connectivity, and advancements within free trade frameworks such as the ASEAN Free Trade Area and the Regional Comprehensive Economic Partnership." "Efforts to promote labor mobility and regional supply chain integration continue, although they still face structural obstacles," he noted. According to him, ASEAN's goal to become the world's fourth-largest economy is theoretically attainable due to its demographic projections, strategic geographic positioning, and the vast potential of domestic markets. However, realizing this ambition will depend heavily on consistent structural reforms, political stability, and the collective capacity of member states to create a policy ecosystem that supports investment and innovation. "Achieving this goal will require stronger policy synergy, efforts to bridge gaps among member states, and a long-term vision that is both consistent and adaptable to global dynamics," he said. Looking ahead, Syafruddin believed ASEAN has the potential to become a stabilizing force in global affairs. "The region could advocate for a more equitable multilateral trading system and push for more inclusive global governance," he said. "This vision can only be realized if ASEAN maintains internal cohesion, deepens substantive economic integration, and crafts a consistent external strategy," he noted.
Malaysia Sun
6 hours ago
- Malaysia Sun
Column: ASEAN and China working together for a prosperous 2045
by Yuan Zhi The recently unveiled ASEAN Community Vision 2045, launched at the 46th ASEAN Summit under the theme "Our Shared Future," embodies the Eastern ideal of collective prosperity. This vision, rooted in the Asian traditions of harmony and mutual progress, resonates with Chinese President Xi Jinping's call for building a community with a shared future for mankind. A PARTNERSHIP OF MUTUAL BENEFIT While some in other parts of world are turning inward, China and ASEAN have been embracing partnership for mutual benefit. For 16 consecutive years, China has been ASEAN's largest trading partner, and ASEAN has held the same position for China over the past five years. President Xi's recent visits to Vietnam, Malaysia and Cambodia have reinforced the time-honored bonds between the Asian nations and underscored China's commitment to strengthening ties with its neighbors for a community with a shared future. THE URGENCY OF ECONOMIC RESILIENCE The global trade landscape is shifting. Average U.S. tariffs on Southeast Asian goods now exceed 30 percent, and supply-chain disruptions have exposed the risks of overreliance on distant and volatile markets. ASEAN's economic future hinges on diversification and regional integration -- areas where China offers unparalleled advantages. As the world's second-largest economy and the top trading nation, China has been a stabilizing force for ASEAN through crises like the 1997-98 Asian financial turmoil and the 2008 global recession. Today, initiatives like the Belt and Road Initiative and the Global Development Initiative provide ASEAN with infrastructure, technology and trade frameworks to boost self-reliance. THE PATH TO 2045: INNOVATION AND INTEGRATION ASEAN's manufacturing capacity stands to gain from deeper economic integration with China. Its economic resilience will benefit from more trade with China. And ASEAN's ambitions for digital and green transitions align perfectly with China's strengths in AI, renewable energy and e-commerce. Despite U.S. restrictions, China's innovative industry continues to develop at a miraculous speed, as evidenced by breakthroughs such as Deepseek. According to the 2024 Global Innovation Index, the past ten years have witnessed China as one of the economies experiencing the most rapid growth in innovation power. In May, China and 10 ASEAN countries have fully completed negotiations on the Version 3.0 China-ASEAN Free Trade Area. By modernizing trade rules and expanding cooperation in emerging sectors, China and ASEAN are creating a more dynamic economic future -- one that is more resilient against external shocks. THE "ASIAN MOMENT" IN GLOBALIZATION As Chinese Foreign Minister Wang Yi said, globalization is experiencing an "Asian moment" and the world's focus is shifting towards Asia. The inaugural ASEAN-China-GCC (Gulf Cooperation Council) Summit alongside the 46th ASEAN Summit signals the region's rise as a hub of 21st-century multilateralism. ASEAN and China working side by side will create greater resilience, innovation and shared prosperity -- essential ingredients for realizing Community Vision 2045. Editor's note: The author is a commentator on international affairs based in Kuala Lumpur. The views expressed in this article are those of the author and do not necessarily reflect the positions of Xinhua News Agency.
