Bank Indonesia Cuts Rate Unexpectedly

(RTTNews) - Indonesia's central bank reduced its key interest rate unexpectedly to the lowest level since 2022 to stimulate economic growth and also raised expectations for more rate reductions.

The Bank Indonesia board, governed by Perry Warjiyo, decided to cut the BI rate by 25 basis points to 4.75 percent. Markets anticipated the central bank to hold the rate this time amid political unrest.

The bank has lowered the benchmark rate by 125 basis points so far this year. The current level of 4.75 percent is the lowest since October 2022.

The deposit facility rate was lowered more sharply by 50 basis points to 3.75 percent and the lending facility rate by 25 basis points to 5.50 percent.

The bank said the decision aligns with joint efforts to stimulate growth by maintaining inflation within the range of 1.5 to 3.5 percent this year and next.

Further, BI said it will continue to evaluate the prospects for further easing in order to boost economic growth, while maintaining stability in the rupiah exchange rate.

With the positive impetus from government's stimulus package and monetary policy easing, the central bank projected the economy to grow above the midpoint of the 4.6 percent to 5.4 percent range this year.