Indonesia’s central bank yesterday unexpectedly cut key interest rates for the first time in more than three years as the rupiah strengthens and ahead of an expected US Federal Reserve rate reduction later in the day.
Bank Indonesia lowered the seven-day reverse repurchase rate by 25 basis points to 6 percent, marking the first such move since early 2021. Its two other main rates were also cut by 25 basis points.
“The Federal Funds Rate direction is getting clearer, and the rupiah is relatively stable and even getting stronger,” Bank Indonesia Governor Perry Warjiyo said.
Photo: Bloomberg
“These two factors are the reason why we lowered the interest rate right now,” he said.
The Indonesian central bank had steadily increased borrowing costs to defend the rupiah amid growing global economic uncertainty and rising inflation.
However, with price rises slowing, Warjiyo said the decision to cut was consistent with the bank’s prediction that inflation would remain low this year and next.
After rallying almost 7 percent this quarter, Indonesia’s currency is trading close to its strongest level versus the US dollar in a year, thanks in large part to a likely Fed cut, and low and stable domestic inflation. That gave Warjiyo scope to act sooner rather than later — especially as a more aggressive cut from the Fed would risk further rupiah gains versus the US dollar.
Tight financial conditions after 275 basis points of Bank Indonesia’s rate hikes in the past two years are also starting to show in Southeast Asia’s largest economy, Bloomberg Economics’ Tamara Henderson and Andrej Sokol said in a note this week, supporting calls for an early rate cut.
While Indonesia’s economic outlook remains solid this quarter, with the central bank keeping its GDP growth estimate this year at a range of 4.7 percent to 5.5 percent, Warjiyo said that domestic activity needs to be supported.
Additional reporting by Bloomberg
When an apartment comes up for rent in Germany’s big cities, hundreds of prospective tenants often queue down the street to view it, but the acute shortage of affordable housing is getting scant attention ahead of today’s snap general election. “Housing is one of the main problems for people, but nobody talks about it, nobody takes it seriously,” said Andreas Ibel, president of Build Europe, an association representing housing developers. Migration and the sluggish economy top the list of voters’ concerns, but analysts say housing policy fails to break through as returns on investment take time to register, making the
NOT TO WORRY: Some people are concerned funds might continue moving out of the country, but the central bank said financial account outflows are not unusual in Taiwan Taiwan’s outbound investments hit a new high last year due to investments made by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and other major manufacturers to boost global expansion, the central bank said on Thursday. The net increase in outbound investments last year reached a record US$21.05 billion, while the net increase in outbound investments by Taiwanese residents reached a record US$31.98 billion, central bank data showed. Chen Fei-wen (陳斐紋), deputy director of the central bank’s Department of Economic Research, said the increase was largely due to TSMC’s efforts to expand production in the US and Japan. Investments by Vanguard International
WARNING SHOT: The US president has threatened to impose 25 percent tariffs on all imported vehicles, and similar or higher duties on pharmaceuticals and semiconductors US President Donald Trump on Wednesday suggested that a trade deal with China was “possible” — a key target in the US leader’s tariffs policy. The US in 2020 had already agreed to “a great trade deal with China” and a new deal was “possible,” Trump said. Trump said he expected Chinese President Xi Jinping (習近平) to visit the US, without giving a timeline for his trip. Trump also said that he was talking to China about TikTok, as the US seeks to broker a sale of the popular app owned by Chinese firm ByteDance Ltd (字節跳動). Trump last week said that he had
STRUGGLING TO SURVIVE: The group is proposing a consortium of investors, with Tesla as the largest backer, and possibly a minority investment by Hon Hai Precision Nissan Motor Co shares jumped after the Financial Times reported that a high-level Japanese group has drawn up plans to seek investment from Elon Musk’s Tesla Inc to aid the struggling automaker. The group believes the electric vehicle (EV) maker is interested in acquiring Nissan’s plants in the US, the newspaper reported, citing people it did not identify. The proposal envisions a consortium of investors, with Tesla as the largest backer, but also includes the possibility of a minority investment by Hon Hai Precision Industry Co (鴻海精密) to prevent a full takeover by the Apple supplier, the report said. The group is