Latest news with #PerryWarjiyo
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
The Star
22-05-2025
- Business
- The Star
Indonesia set for more rate cuts on growth view: Analysts
FILE PHOTO: Indonesia's Central Bank Governor Perry Warjiyo speaks during a press conference at Bank Indonesia's headquarters in Jakarta, Indonesia, January 15, 2025. REUTERS/Willy Kurniawan/File Photo JAKARTA: An improving market sentiment will pave the way for Indonesia's central bank to better balance its pro-growth stance with ensuring stability in the financial markets, according to analysts. Bank Indonesia will not hesitate to stabilise the rupiah through intervention amid economic uncertainty, Governor Perry Warjiyo (pic) said after reducing the BI-Rate by 25 basis points on Wednesday. The central bank also lowered its 2025 gross domestic product growth forecast to a range of 4.6% to 5.4%. There's room for the central bank to further ease policy as the rupiah regains footing amid a weaker dollar, cooling trade tensions and waning fiscal concerns. Foreign flows are also returning to local stocks and bonds. "BI could cut the policy rate by another 75 basis points this year as the rupiah stabilises,' though a potential delay in Federal Reserve fund rate cut may slow Indonesia's pace of easing, Goldman Sachs Group Inc analysts Rina Jio and Danny Suwanapruti wrote in a note. - Bloomberg
Bloomberg
22-05-2025
- Business
- Bloomberg
Indonesia Set for More Rate Cuts on Growth View, Analysts Say
An improving market sentiment will pave the way for Indonesia's central bank to better balance its pro-growth stance with ensuring stability in the financial markets, according to analysts. Bank Indonesia will not hesitate to stabilize the rupiah through intervention amid economic uncertainty, Governor Perry Warjiyo said after reducing the BI-Rate by 25 basis points on Wednesday. The central bank also lowered its 2025 gross domestic product growth forecast to a range of 4.6% to 5.4%.
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.
Free Malaysia Today
21-05-2025
- Business
- Free Malaysia Today
Indonesia resumes rate cuts as growth outlook dims, rupiah gains
Bank Indonesia has been closely monitoring the rupiah as Washington continues to negotiate tariffs with trading partners. (Reuters pic) JAKARTA : Indonesia's central bank cut its benchmark interest rate (BI-Rate) for a second time this year to bolster the economy in the face of global trade tensions and recent gains in the local currency. Bank Indonesia (BI) reduced the BI-Rate by 25 basis points to 5.5% today, its lowest level since 2022. Twenty-two of 35 economists in a Bloomberg survey predicted the central bank's move, while the rest expected policymakers to stand pat as they have done since easing in January. The decision comes weeks after Indonesia reported the slowest gross domestic product growth in three years, while the rupiah has strengthened in the past month along with many Asian currencies. The planned 32% tariff on Indonesian exports to the US piles on tepid domestic consumption and weak state revenue that has forced a cutback in government spending in Southeast Asia's largest economy. Indonesia's economy needs to further strengthen, and interest rates need to come down to support growth, governor Perry Warjiyo said at the briefing, after slightly lowering the estimate for this year's GDP growth to a range of 4.6% to 5.4%. 'Second quarter indicators show that various sectors are in need of support,' he said. Multiple analysts in the past weeks have also slashed their growth estimates to under 5% level this year, well below the 8% pace that President Prabowo Subianto wants to see during his term. 'At the same time, the rupiah is stable with a tendency to strengthen,' Warjiyo said, citing improving sentiment and BI's sustained intervention measures. BI joins central banks around the region in loosening monetary policy to shore up their economies from the trade war fallout. Singapore, Thailand and the Philippines eased in April. Malaysia stood pat this month but lowered reserve requirements to encourage more lending while the governor signaled that the central bank has room to act if needed. Giving the central bank some room to maneuver is the rupiah's recent rebound as the de-escalation of tariff tensions between the US and China spurs risk-on sentiment. The rupiah has gained almost 3% since it touched a record low on April 9, supported by foreign inflows into equities and government bonds. However, BI will still closely monitor the currency as Washington continues to negotiate tariffs with trading partners – including Indonesia – and as the Federal Reserve is seen to deliver fewer rate cuts this year. On the local front, seasonal outflows from dividend payments and maturing foreign debt this quarter could also pressure the rupiah. Other highlights from the briefing: Inflation to stay within 1.5% to 3.5% this year and next. Bank lending is now forecast to grow 8%-11% from a previous estimate of 11%-13% expansion, after credit growth cooled at the slowest pace in two years. The central bank continues to buy government bonds in secondary market.
