Bank Indonesia Cuts Benchmark Interest Rate by 0.25% in July 2019
At July's two-day monetary policy meeting (held on 17-18 July 2019), the central bank of Indonesia (Bank Indonesia) surprised us by deciding to cut the benchmark BI 7-day Reverse Repo Rate by 25 basis points (bps) to 5.75 percent. Meanwhile, the deposit facility and lending facility rates were lowered - also by 25 bps - to 5.00 percent and 6.50 percent, respectively.
The rate cut took us by surprise because - under the leadership of Governor Perry Warjiyo - Indonesia's central bank does not refrain from raising rates aggressively when it feels the need (as we witnessed in 2018 when the benchmark rate was raised by a total of 175 bps), while it has been very careful in lowering rates amid the uncertain international environment (involving the policy decisions of the US Federal Reserve and the US-China tariff war) as well as Indonesia's fragile current account balance and rupiah exchange rate.
While we had indeed forecast one Bank Indonesia rate cut in the second half of 2019, we assumed it would take place after the Federal Reserve (Fed) had cut its key rate (the Fed may cut its rates at its policy meeting at the end of July 2019).
Read a full analysis in the July 2019 edition of our monthly research report. You can purchase the report by sending an email to info@indonesia-investments.com or a WhatsApp message to the following number: +62(0)8788.410.6944
Poll Indonesia Investments:
At the end of 2019 the Indonesian rupiah exchange rate will be closest to ....
Voting possible: -
Results
- IDR 13,000 per US dollar (33.9%)
- IDR 14,000 per US dollar (33.3%)
- IDR 15,000 per US dollar (25.8%)
- No opinion (7%)
Total amount of votes: 954