Indonesia central bank cuts key interest rate after pledge to buy bonds

[JAKARTA] Indonesia's central bank cut its benchmark interest rate on Thursday for the fourth time this year after agreeing to expand bond purchases to shore up South-east Asia's largest economy amid the coronavirus pandemic.

Bank Indonesia (BI) cut its 7-day reverse repurchase rate by 25 basis points (bps) to 4 per cent, the lowest since at least 2016 when it adopted the rate as its benchmark, and as predicted by a slim majority of respondents in a Reuters poll.

The other two main policy rates, the overnight deposit and lending rates, were cut by the same amount to 3.25 per cent and 4.75 per cent respectively.

BI and the government unveiled a US$40 billion deficit financing scheme last week, with the central bank pledging to buy US$28 billion of bonds while relinquishing interest payments. With Thursday's move, BI has cut rates by a total of 100 bps this year, on top of 100 bps in reductions in 2019.

REUTERS