Latest news with #BIRate
The Star
22-05-2025
- Business
- The Star
Central bank trims benchmark interest rate
JAKARTA: Bank Indonesia (BI) has cut its benchmark interest rate by 25 basis points (bps) in an effort to boost economic growth while inflation is under control. Following the central bank's two-day monthly policy meeting, BI governor Perry Warjiyo announced at a press conference in Jakarta on Wednesday that the key interest rate, the BI Rate, would be cut to 5.5% from 5.75%. The move is the second reduction so far this year after the monetary policy authority also reduced the BI rate by 25 bps in January. Perry said the loosening measure was taken to 'push sustainable economic growth'. Indonesia's gross domestic product (GDP) only grew by 4.87% year-on-year (y-o-y) in this year's first quarter, which marked a slowdown from the 5.02% y-o-y growth attained in the preceding quarter, the most sluggish growth since the pandemic. Perry announced that the central bank revised its GDP growth forecast for 2025 to a range of 4.6% to 5.4%, down marginally from its initial estimate of 4.7% to 5.5%. The governor said the BI rate cut was possible as inflation remained low and the rupiah's exchange rate against the United States dollar remained 'stable'. Inflation has been sitting well within BI's target range of 2.5, plus/minus 1%, throughout 2024 and even dipped below the floor in the first three months of this year, but bounced back to 1.95% in April. The rupiah's exchange rate is generally prone to volatility in times of global economic turbulence. The currency has been on a downward trend against the greenback since September of last year as the global economy has been clouded by geopolitical and geoeconomic tensions. The rupiah briefly breached the psychological threshold of 17,000 rupiah per dollar on April 8 and flirted with the historic low of 17,300 rupiah recorded amid the Asian Financial Crisis in 1998. April 8 was the day before the White House imposed so-called 'reciprocal' tariffs against imports from dozens of countries, including Indonesia, marking the beginning of global trade tensions initiated by US President Donald Trump in a bid to force global corporations to move factories to the United States. China is the main target of Washington's tariffs and other trade and investment restrictions, but the trade war between the world's two largest economies died down somewhat as the United States last week reached a temporary agreement with Beijing to significantly reduce the triple-digit tariff rates they had imposed on each other's exports for 90 days. Investors interpreted the deal as a signal that Trump would not go on with his plan of imposing exorbitant import duties also on dozens of other countries, which would significantly stunt global economic growth. As a result, global risk appetite has increased again, meaning more capital would flow into emerging markets like Indonesia, strengthening the rupiah in the process. Regaining its footing at the start of this month, the Indonesian currency has since changed hands at around 16,500 rupiah per dollar, a value Perry said 'reflected' the country's fundamentals. However, he noted that the deal between Beijing and Washington was 'still temporary', meaning risks were still lurking. Another factor supporting BI's cut was its assessment that the US Federal Reserve will slash its federal funds rate (FFR) twice this year, which Perry said is likely to happen in September and December. CME Group's FedWatch Tool shows that the majority of interest rate traders believe the US central bank will cut its rate by 25 bps in September and by the same amount in December. Bank Permata chief economist Josua Pardede wrote in an analysis on Wednesday that the central bank would 'gradually shift its focus from pro-stability to pro-growth'. By law, the central bank is mandated to ensure rupiah stability as well as a monetary policy environment that supports business activity. 'On the domestic front, rising concerns over Indonesia's slowing GDP growth may create room for further monetary easing,' said Josua. He argued that BI 'still had room' to cut by another 25 bps in the second half. Fithra Faisal Hastiadi, an economist at SSI Research, recommended BI keep the benchmark rate unchanged until the second half 'to assess the durability of global financial stability following the temporary suspension of US tariffs'. 'From a risk management standpoint, holding the rate would have allowed BI more time to evaluate potential spillovers from external uncertainties,' said Fithra in an analysis on Wednesday. He explained that the scope for further policy easing by BI would particularly depend on the trajectory of the FFR, China's growth performance and geopolitical uncertainties. Domestically, the decision would depend on inflation, currency stability and 'private sector recovery'. — The Jakarta Post/ANN
Gulf Today
21-05-2025
- Business
- Gulf Today
Indonesia CB resumes monetary easing to support slowing economy
Indonesia's central bank cut its key interest rate on Wednesday as the market expected, resuming its monetary easing to support the slowing economy after pressure on the rupiah receded. Bank Indonesia (BI) lowered the benchmark 7-day reverse repurchase rate, known as the BI Rate, by 25 basis points to 5.50 per cent, as expected by 20 of 32 economists polled by Reuters. It also cut two other policy rates by the same amount. 'This decision is consistent with the forecast of low and manageable inflation in 2025 and 2026 within target to maintain the stability of the rupiah in accordance with its fundamentals, and to contribute to economic growth,' Governor Perry Warjiyo told a press conference in Jakarta. He said growth needed to be strengthened to mitigate the impact of US tariffs, and policies needed to support household demand and exports. Southeast Asia's largest economy grew an annual 4.87 per cent in the first quarter, its weakest pace in more than three years. BI slightly revised down its forecast for growth this year to a range of 4.6 per cent to 5.4 per cent compared with 4.7 per cent to 5.5 per cent previously. The government has set a 5.2 per cent growth target this year and President Prabowo Subianto has pledged to lift growth to 8 per cent by the end of his term in 2029. In the press conference, Governor Warjiyo urged banks to do more to support economic growth by lowering their lending rates and giving out more loans. 'Let's lower our interest rates, especially lending credit to support growth,' Warjiyo said. BI also said it would allow banks to source up to 35 per cent of their capital from foreign funds with effect from June 1. The current level is 30 per cent. The moves follow a slowdown in loans growth in April to 8.88 per cent, from 9.16 per cent in the previous month. BI also revised down its 2025 loan growth target to 8 per cent to 11 per cent compared with 11 per cent to 13 per cent previously. BI cut rates in September last year and again in January. It then held steady at the next three meetings as market volatility sparked by global trade tensions weighed on the rupiah, which plunged to a record low against the US dollar in April. It has since recovered by more than 3 per cent. Warjiyo further added that pressure on the rupiah had eased due to improved global market conditions and BI's intervention, but the bank was ready to take action, including intervention in the offshore market, if pressures reemerged. Analysts said BI could make more cuts in the coming months given the low inflation outlook, and depending on the rupiah's performance. 'My sense is BI is likely to deliver at least two more rate cuts in 2025 to 5.00 per cent as the economy needs to be supported by easing the monetary policy if USD/IDR continues to move lower to 16,000,' SMBC economist Ryota Abe said. The central bank also cut its overnight deposit facility and lending facility rates by the same amount to 4.75 per cent and 6.25 per cent, respectively.
Business Recorder
21-05-2025
- Business
- Business Recorder
Indonesia central bank cuts rates, as expected
JAKARTA: Indonesia's central bank cut its key interest rate on Wednesday, as expected by the market, resuming its monetary easing after holding policy steady at its previous three meetings. Bank Indonesia lowered the benchmark 7-day reverse repurchase rate, known as the BI Rate, by 25 basis points to 5.50%, as expected by 20 of 32 economists polled by Reuters. Indonesia central bank conducts currency intervention whenever necessary, official says The rest had predicted BI would stand pat. The central bank also cut its overnight deposit facility and lending facility rates by the same amount to 4.75% and 6.25%, respectively.
The Star
21-05-2025
- Business
- The Star
Indonesia central bank cuts rates, as expected
JAKARTA: Indonesia's central bank cut its key interest rate on Wednesday (May 21), as expected by the market, resuming its monetary easing after holding policy steady at its previous three meetings. Bank Indonesia lowered the benchmark seven-day reverse repurchase rate, known as the BI Rate, by 25 basis points to 5.50%, as expected by 20 of 32 economists polled by Reuters. The rest had predicted BI would stand pat. The central bank also cut its overnight deposit facility and lending facility rates by the same amount to 4.75% and 6.25%, respectively. Reuters
CNBC
24-04-2025
- Business
- CNBC
Indonesia plans to import more from the U.S. to 'narrow' trade surplus, finance minister says
U.S. President Donald Trump's tariffs have pushed countries to look for ways to improve their trade balance with the U.S. and negotiate the extent of duties levied on their imports. Indonesia's plan now is to "narrow," or even eliminate its trade surplus with the U.S., the country's finance minister Sri Mulyani Indrawati told CNBC on the sidelines of the IMF-World Bank Spring Meetings. This comes after the country was hit with a 32% levy on exports to the U.S. by President Donald Trump on April 2. He has since lowered the duty to 10% as part of his 90-day pause on tariffs imposed on some countries and goods. Indrawati noted that the resource-rich country has been perceived to be preventing trade via "non-tariff barriers" such as its administrative processes, customs processes on imported goods and taxation procedures. Indonesia is now looking to import more agricultural products such as wheat, soybeans and corn from the U.S, she said. "We import not only from the United States but many others ... we can always discuss about how we can narrow and put the United States in a better advantage of providing those kinds of agriculture products," she noted. Indonesia could potentially also import oil and gas - especially liquid gas from the U.S. - as its domestic production is insufficient for its energy needs, the finance minister said. Her comments come as Indonesia's trade surplus with the U.S. stood at $4.3 billion between January to March 2025 - up from $3.61 billion in the same period the year before. The superpower was the biggest contributor to the Southeast Asian country's overall trade surplus of $10.92 billion in the first quarter. However, Indrawati noted that trade to the U.S. accounts for less than 2% of the country's gross domestic product. "So, it's not really that big," given that total exports accounts for 20% of Indonesia's GDP, she added. Still, Indrawati said that the impact of Trump's tariffs could potentially be felt in other ways as countries look to diversify their exports from the U.S. Bank Indonesia held its policy rates for its third consecutive review on Wednesday, in a bid to maintain the exchange rate stability of the Indonesian rupiah against the uncertain macroeconomic outlook. The central bank kept its benchmark 7-day reverse repurchase rate - which is also known as BI Rate -unchanged at 5.75%, as expected all but two of 26 economists polled by Reuters. It also kept its two other policy rates steady. The move comes as the Indonesian rupiah hit a record low while the Jakarta Composite index plunged earlier in the month as capital flowed out after the U.S. imposed "reciprocal tariffs" on countries including Indonesia. The decision serves to safeguard the rupiah's stability as the central bank continues to assess future room for a cut, taking into account the country's inflation rate and growth prospects, Governor Perry Warjiyo said. "Our short term priority is exchange rate stability. Once stability is maintained, the room for a rate cut will be more open and that would be the time to decide on future interest rate policy," he added. The rupiah weakened 0.12% against the dollar to 16,800 on Thursday, a day after BI's rate decision.
