JAKARTA: Indonesia’s central bank cut interest rates and flagged room for more easing on Thursday as it slashed its 2020 economic growth forecast for Southeast Asia’s largest economy, with the coronavirus outbreak pilling pressure on the rupiah.
The move followed aggressive monetary easing by central banks around the world to fight the economic toll from the spreading virus outbreak that has put tens of millions of people under lockdown and brought economic activity to a standstill.
Bank Indonesia (BI) trimmed the 7-day reverse repurchase rate by 25 basis points (bps) to 4.5% – the lowest since April 2018.
Governor Perry Warjiyo said BI has room for a steeper cut, with inflation being low and the Federal Reserves trimming US rates by 100 bps, but decided on a 25-bp cut to maintain attractive premiums on Indonesian assets.
The rupiah, which tumbled more than 4% shortly before Warjiyo spoke to reach 15,850 per dollar, the lowest since 1998, barely moved after the announcement. The main stock index was trading 5.4% lower on Thursday, while bond yields jumped.
“We want to tell everybody that we’re working extra, extra hard from time to time … to maintain confidence,” Warjiyo told an online briefing.
It was BI’s second cut in 2020 and the sixth in the current easing cycle. – March 19, 2020, Reuters
