Bank Indonesia surprises market with rate cut to back Prabowo’s growth goal

[JAKARTA] Bank Indonesia (BI) on Wednesday (Aug 20) unexpectedly cut its policy rate for the second consecutive time since July, citing low inflation and a stable rupiah as key factors.

The central bank said the move aims to support economic growth, and that it will continue to monitor the situation to decide if there is room for further cuts. It projects that this year’s growth could exceed 5 per cent after the economy unexpectedly reached 5.12 per cent in the second quarter.

BI lowered its benchmark rate by 25 basis points (bps) to 5 per cent, defying the expectations of most analysts surveyed by Bloomberg who had predicted a hold. The central bank also cut its overnight deposit and lending facility rates to 4.25 per cent and 5.75 per cent, respectively.