Thursday, September 19, 2019

Indonesia cuts rate 3rd month in a row to boost growth

     Indonesia's central bank lowered its benchmark interest rates for the third consecutive month in what it said was a preemptive move to "drive the momentum of domestic economic growth amid slowing global economic conditions."
     Bank Indonesia (BI) cut its benchmark BI 7-day Reverse Repo Rate (BI7DRR) by another 25 basis points to 5.25 percent and has now cut it by 75 points following cuts in July and August.
     BI also cut its deposit facility rate to 4.50 percent and the lending facility rate to 6.0 percent.
     The central bank said the rate cut was consistent with its forecast for inflation that remains below the midpoint of its 2019 target range of 3.5 percent, plus/minus 1 percentage point, and to ensure that domestic financial assets remain attractive.
     In addition to the rate cut, BI said it had also relaxed its macro prudential policies to boost the capacity of bank lending and to encourage the demand for credit. This includes easing the ratio of loan-to-value/financing to value for property loans and advances for motor vehicles that are environmentally friendly.
     BI said tensions between the U.S. and China around trade was continuing to put pressure on the world economy and kept up uncertainty in global financial markets, affecting Indonesia's economy.
     "Exports are not expected to improve due to global demand and declining commodity prices..." BI said, adding exports of motor vehicles are still growing.
     BI confirmed its forecast for economic growth to be below the midpoint of the range of 5.0 to 5.4 percent and then rise toward the midpoint of the range of 5.1 to 5.5 percent in 2020.
     Indonesia's inflation rate remains under control and BI confirmed its forecast for inflation to be below the midpoint of its target range this year and then within its 2020 target range of 3.0 percent, plus/minus 1 percentage points.


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