Latest news with #BankIndonesia
Times of Oman
4 days ago
- Business
- Times of Oman
US dollar weakness opens door for RBI to further cut repo rates by 75bps in 2025: Jefferies
New Delhi: The weakness in the US dollar has created real room for the Reserve Bank of India (RBI) to lower interest rates further by up to 75 basis points (bps) by the end of calendar year 2025, according to a report by global financial services firm Jefferies. The report highlighted that similar trends are visible in other emerging markets as well. Alongside India, Bank Indonesia also has room to ease rates further, thanks to the softening of the US dollar. It stated, "US dollar weakness has created real room to cut rates for both Bank Indonesia and the Reserve Bank of India". For India, the disinflationary trend has become increasingly visible. Consumer price inflation averaged 4.6 per cent in the last financial year and dropped to just 3.2 per cent in April this year, the lowest since July. This fall in inflation has increased expectations of further monetary easing by the central bank. Jefferies says that since Sanjay Malhotra took charge as the new RBI Governor in December, replacing Shaktikanta Das, the central bank has already cut the repo rate by 50 basis points. Malhotra's approach is seen as more dovish, with the market interpreting the inflation trend as positive for equities due to the greater potential for rate cuts under his leadership. It said "The same disinflationary trend is increasingly evident in India, though for now it is interpreted as bullish for equities in terms of the potential for RBI rate cuts under the more dovish RBI Governor Sanjay Malhotra". In its latest Annual Report, RBI projected average inflation of around 4 per cent for the ongoing financial year, which ends in March 2026 (FY26). However, Jefferies' India office believes there is room for an additional 75 basis points of rate cuts by the end of 2025, assuming the current economic and currency conditions persist. This outlook, supported by easing inflation and global currency trends, could boost domestic growth and improve the investment climate in the country. The Reserve Bank of India (RBI) in the April Monetary Policy Committee (MPC) meeting had announced a 25-basis-point (bps) cut in the repo rate, reducing it from 6.25 per cent to 6 per cent.
CNA
5 days ago
- Business
- CNA
Commentary: Chaos is taking a sabbatical in Indonesia
SINGAPORE: Bad news can be good for Indonesia. A slowdown in economic growth and the prospective hit from US tariffs may be imposing some discipline on President Prabowo Subianto's government. It's a welcome change. The former general is only seven months into his term and some of the toughest decisions probably still lie ahead. Nonetheless, the sense of chaos that characterised the very start of the administration has abated. Markets approve the return of normalcy: The rupiah has gained this quarter after disappointing last year, and a recent bond auction was well received. Offshore investors are warming to the nation's stock market after seven months of outflows. The central bank felt comfortable enough to lower interest rates last week and signal further easing to come, in a decision that was forecast by most economists. So why the big deal? Bank Indonesia had been hard to read in the closing months of 2024 and the start of this year, when officials oscillated between shoring up the rupiah and stoking growth. Holding on to predictability might not sound exciting, but it's the way monetary affairs are supposed to work. The shift is refreshing. Former Bank of England governor Mervyn King once remarked that the ideal condition is one of boredom. HITS TO THE ECONOMY While many economies will be hurt by the tariffs imposed by President Donald Trump, the 32 per cent so-called reciprocal levy handed down on the country is among the highest in the region. Duties have been reduced to 10 per cent for a few months to allow for a deal. Indonesia is hopeful for an accord but can't count on it. The upside is that disenchantment with American trade policy, and the ham-handed way it has been implemented, has pushed the dollar down against most peers. This has helped boost currencies like the rupiah that were decidedly wobbly last year. It's a silver lining to a poor US approach. The second fright is domestic in origin. Central to Prabowo's campaign was a pledge to accelerate the pace of growth from the average of about 5 per cent recorded by his predecessor, Joko Widodo, to around 8 per cent. That was always going to take some doing; no economy of any consequence is expanding at that clip. First quarter figures, however, showed an unexpected slowdown. The main culprit was a sharp drop in state spending and investment. Household consumption was also lackluster. This wasn't the way it was supposed to work. Prabowo had talked about using the government purse to lift the country's performance, not diminish it. CHAOS AS A DEFINING FEATURE The president has been a victim of his own rhetoric and populist impulses. The new year didn't begin auspiciously. A long-planned increase in a value-added tax was gutted at the last minute. Markets reacted poorly. The perception was that the nuts and bolts of economic policy, previously left largely to technocrats, was being hijacked by Prabowo. Speculation grew that the respected finance minister, Sri Mulyani Indrawati, would soon depart. The tax U-turn was then followed by a drive for savings that became almost comedic. Spending by ministries, agencies and local authorities was frozen; some offices switched off lights and suspended the use of elevators to save electricity. The president attacked some civil servants as 'little kings' intent on stymying his agenda. If he cared so much about fiscal probity, wouldn't it have been better to let the broad VAT hike proceed? The government looked like it didn't know what it was doing. Instead of emphasising stability, a hallmark of Indonesian economic policy in the decades since the Asian financial crisis, chaos looked like it would become the defining feature. A MOMENT OF CALM That's a dangerous development for a country with a current account deficit dependent on capital pouring in to maintain the rupiah's value. That things seemed to have settled down is a blessing. Markets in Jakarta no longer gyrate on speculation about cabinet shake-ups. Meanwhile, Trump's assault on governing norms makes Prabowo's early reversals look minor. Indonesia isn't necessarily out of the woods. The president hasn't walked away from the general idea that a muscular fiscal policy is desirable. Spending on his signature initiative, the provision of free school lunches across the vast archipelago, will probably show up in second-quarter growth figures. And in the event that Trump is able to secure a string of trade deals and the dollar rallies, the rupiah could again buckle. For now, though, let's cautiously celebrate that chaos has taken a sabbatical. The relative stability hasn't come through ideal circumstances, though that it has happened matters. We have had a glimpse of what can happen when Indonesia gets out of its own way.
Yahoo
7 days ago
- Business
- Yahoo
Indonesia to cut secondary reserve requirement for banks to 4%
The Indonesian central bank, Bank Indonesia (BI), is considering a reduction in the secondary reserve requirement for banks from 5% to 4%, effective from June. This policy adjustment is set to free up Rp78.45tn ($4.84bn) in additional liquidity for the banking sector, reported Reuters. The statement was made by Solikin M. Juhro, BI's head of macroprudential policy, during a press conference. The decision to cut the reserve requirement comes after the central bank's third-interest rate reduction since September. BI is also raising the limit on foreign funding for local banks to 35% of their capital, up from 30% to enhance liquidity and loan growth. This move was confirmed by BI last week and that it would adjust the sharia Profit and Loss Sharing (PLM) by 100 basis points from 3.5% to 2.5% for sharia commercial banks, with repo flexibility of 2.5%, to be implemented from 1st June 2025. The central bank has also reiterated its strategy to stabilising the rupiah through interventions in both offshore and domestic foreign exchange markets, and by purchasing government securities in the secondary market. Furthermore, the bank also emphasised its strategies for term-repo and forex swap transactions to secure liquidity in the money market and banking industry. It was confirmed to reduce the BI-Rate to 5.50% and deposit facility (DF) rate to 4.75% and the lending facility (LF) rate to 6.25%, all by 25bps. "Indonesia to cut secondary reserve requirement for banks to 4% " was originally created and published by Retail Banker International, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Recorder
26-05-2025
- Business
- Business Recorder
Indonesia central bank to give nearly $5 billion flexibility to banks to manage liquidity
JAKARTA: The Indonesian central bank's policy to cut a secondary reserve requirement to 4% from 5% starting from June will provide banks with 78.45 trillion rupiah ($4.84 billion) of liquidity they can manage more flexibly, a senior official said on Monday. The comments were made by Solikin M. Juhro, Bank Indonesia's head of macroprudential policy, at a press conference. The central bank announced the planned reduction last week, when it also delivered its third interest rate cut since September, intended to bolster growth in Southeast Asia's biggest economy. Indonesia central bank cuts rates, as expected BI has also announced it would increase the maximum level of foreign funding local banks can take, to 35% of their capital from 30%, starting from June, a policy also meant to increase liquidity and support loan growth, Solikin said.
CNA
26-05-2025
- Business
- CNA
Indonesia central bank to give nearly $5 billion flexibility to banks to manage liquidity
JAKARTA :The Indonesian central bank's policy to cut a secondary reserve requirement to 4 per cent from 5 per cent starting from June will provide banks with 78.45 trillion rupiah ($4.84 billion) of liquidity they can manage more flexibly, a senior official said on Monday. The comments were made by Solikin M. Juhro, Bank Indonesia's head of macroprudential policy, at a press conference. The central bank announced the planned reduction last week, when it also delivered its third interest rate cut since September, intended to bolster growth in Southeast Asia's biggest economy. BI has also announced it would increase the maximum level of foreign funding local banks can take, to 35 per cent of their capital from 30 per cent, starting from June, a policy also meant to increase liquidity and support loan growth, Solikin said. ($1 = 16,210.0000 rupiah)
