Indonesia cuts interest rates for first time since February 2021

This photo shows Jakarta on September 14 2024 AFP-Yonhap — This photo shows Jakarta on Sept. 14, 2024. AFP-Yonhap

SEOUL, September 19 (AJP) - Bank Indonesia (BI) has reduced its benchmark interest rate from 6.25 percent to 6 percent, marking the first rate cut since February 2021. This decision, announced on Wednesday, surprised financial markets as most economists had predicted a rate hold ahead of the U.S. Federal Reserve's policy meeting.

BI Governor Perry Warjiyo cited stable inflation within the target range, a strengthening rupiah, and the need to boost economic growth as reasons for the rate cut. He maintained the 2024 GDP growth forecast at 5.1 percent and anticipated higher growth in the following year.

Indonesia's inflation rate has remained within BI's target of 1.5-3.5 percent since last year, hitting a 19-month low of 2.12 percent in August. The rupiah has also shown strength, appreciating 7 percent against the U.S. dollar in the third quarter alone, supported by foreign investment in government bonds and a trade surplus.

Gareth Leather, Capital Economics' senior Asia economist, suggested the possibility of further rate cuts, given controlled inflation and the rebounding rupiah. This move positions Indonesia as one of the first Asian economies to shift towards monetary easing, potentially setting a trend for the region.

AJU PRESS

Indonesia cuts interest rates for first time since February 2021

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