Indonesian central bank cuts rate, heralds further loosening strides

Source: Xinhua | 2020-06-19

The Indonesian central bank on Thursday edged down its benchmark interest rate for the third time this year to shore up the pandemic-hit economy and signaled further easing policies.

The central bank, Bank Indonesia, drifted down its seven-day reverse repurchase rate by 25 basis points to 4.25 percent, Governor of Bank Indonesia Perry Warjiyo said.

"This decision is in line with the efforts to shore up the economy during the COVID-19 pandemic," he told an online press conference.

Warjiyo heralded further loosening strides as Indonesian currency rupiah has been relatively stable against the greenback amid benign inflation.

"Bank Indonesia sees a room for easing policies along with the subdued inflation and the maintained external stability," he said.

Bank Indonesia's foreign exchange reserves nudged higher by 2.8 percent to 130.5 billion U.S. dollars in May and the trade balance swung to a 2.09-billion-U.S. dollar surplus in the month.

The GDP growth of Southeast Asia's biggest economy slowed to 2.97 percent in the first quarter and was estimated to shrink by 3.1 percent in the second quarter, according to Finance Minister Sri Mulyani Indrawati.

Although the economic recovery was expected to commence in the third quarter and persist to the final quarter, the economy has been forecast to grow by 2.3 percent this year, compared with 5.02 percent last year.

The COVID-19 pandemic has halted consumption and deeply hit exports and imports of capital goods and raw materials.

The weakening global economic forecast along with the launches of huge stimulus packages has encouraged capital flows into risky assets of emerging markets, including Indonesia.

The virus outbreak has infected 42,762 people across the vast-archipelagic nation and killed 2,339, the Health Ministry announced on Thursday.