Indonesia unexpectedly cuts key interest rate

Agence France-Presse

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Indonesia unexpectedly cuts key interest rate

AFP

Bank Indonesia reduced the rate by 25 basis points to 4.75%, despite many economists having forecast there would no change

JAKARTA, Indonesia – Indonesia’s central bank on Thursday, October 20 unexpectedly cut its key interest rate for the 6th time this year in a bid to boost slowing growth in Southeast Asia’s top economy.

Bank Indonesia reduced the rate by 25 basis points to 4.75%, despite many economists having forecast there would no change.

It was the second consecutive month that policymakers have trimmed rates as they scramble to boost the G20 economy, which has been losing steam in recent years due to slowing demand for its commodity exports.

The bank said it had decided on the move as it believes 3rd-quarter economic growth will not be as strong as expected. The growth data is due to be released next month. 

A statement said the bank “believes that monetary easing will strengthen the effort to drive domestic demand… and further push momentum for economic growth”.

Growth in the resource-rich country, which used to regularly come in at over six percent a year, has been sliding in recent times.

The economy expanded at 5.18% in the second quarter.

The bank also said Thursday it expected growth in 2016 to come in at the lower end of its target range, which is between 4.9 and 5.3%.

President Joko “Jokowi” Widodo came to power two years ago on a pledge to boost growth, but has struggled to attract investment and get key projects off the ground due to the dim global outlook and Indonesia’s difficult business environment. – Rappler.com

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