Indonesia's central bank cut interest rates on Thursday, to support the economic recovery as policymakers expect inflation to remain low and the rupiah exchange rate to stabilize over the coming months. The Board of Governors decided to cut the seven-day reverse repo rate by 25 basis points to 3.50 percent, the Bank Indonesia said. The decision was in line with economists' expectations. The previous change in the rate was a quarter-point reduction in November.The deposit facility rate was lowered to 2.75 percent from 2.50 percent and the lending rate to 4.25 percent from 4.50 percent. "This decision is consistent with the forecast for low inflation and maintained stability of the Rupiah exchange rate, as well as a follow-up step to stimulate momentum for national economic recovery," the bank said. The bank expects the vaccination drive against the coronavirus pandemic to boost growth in the coming months. BI lowered its growth forecast for this year to 4.3-5.3 percent from 4.8-5.8 percent predicted in December. "We suspect further easing is likely over the coming months given the poor outlook for the economy," Capital Economics economist Gareth Leather said. The economy had shrunk 2.19 percent year-on-year in the fourth quarter of 2020. Policymakers assessed that the strengthening of the Rupiah exchange rate has the potential to continue in line with its fundamentally undervalued level.
Leather said the performance of the rupiah will be a key determinant of the pace and timing of the central bank's next move. The Indonesian economy remains vulnerable to sudden falls in the rupiah, thanks to A high level of foreign currency debt, the economist said. That said, the currency has continued to hold up well against the US dollar during January. "Provided this strong performance is sustained, further cuts are likely in the first half of the year," Leather added.
For comments and feedback contact: editorial@rttnews.com
Economic News
What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.
May 22, 2026 14:46 ET Minutes of the latest Fed policy session was the highlight of the week along with survey data on the U.S. housing market. In Europe, survey data signaled the trends in the euro area private sector. Further, consumer price inflation data from the U.K. was in focus. In Asia, various economic indicators from China drew attention to the health of the economy.