The Indonesian central bank yesterday cut its benchmark interest rate for the first time in almost two years and pledged more easing to come as it shifts focus to supporting economic growth.
The seven-day reverse repurchase rate was lowered by 25 basis points to 5.75 percent, in line with the forecasts of most economists surveyed by Bloomberg.
The decision came hours after a similar move by the Bank of Korea and after dovish signals from the US Federal Reserve that it would cut interest rates for the first time in a decade this month.
Photo: Reuters
It underscores concern among central bankers about a worsening global economy and trade tensions.
“Bank Indonesia sees that the room is still open for accomodative monetary policy that is in line with the low inflation estimate and the need to push economic growth momentum further,” Governor Perry Warjiyo said in Jakarta.
After raising interest rates by 175 basis points last year to stem an emerging-market rout, Bank Indonesia has proceeded cautiously this year to avoid destabilizing the currency.
With the rupiah gaining this year and concerns about the current-
account deficit moderating, Warjiyo is turning his attention to spurring growth.
Weaker global demand and a fallout from the US-China trade dispute are increasingly weighing on Indonesia’s prospects.
The government has trimmed growth forecasts for this year, while the central bank expects the expansion would probably be below the midpoint of its 5 percent to 5.4 percent forecast range.
Bank Indonesia’s first cut since September 2017 might just be the beginning of an easing cycle that could push the benchmark rate down to 5 percent by the end of the year, according to Morgan Stanley.
Still, there is reason for the central bank to tread more cautiously given Indonesia’s reliance on foreign inflows to fund the current account deficit.
Mohamed Faiz Nagutha, an economist at Bank of America Merrill Lynch in Singapore, said this is probably a “mini easing cycle” with more rate cuts to come given low inflation.
“We see more for sure,” he said, forecasting 75 basis points of easing this year, including yesterday’s move. “It was always a matter of time, not if.”
Price pressures remain subdued, giving policymakers room to move. While core inflation accelerated to its highest level in more than two years last month, the headline measure is well within the central bank’s target band of 2.5 percent to 4.5 percent.
Warjiyo said inflation would be low for the rest of the year, forecasting it below the midpoint of the 2.5 to 4.5 percent target.
TECH PARTNERSHIP: The deal with Arizona-based Amkor would provide TSMC with advanced packing and test capacities, a requirement to serve US customers Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is collaborating with Amkor Technology Inc to provide local advanced packaging and test capacities in Arizona to address customer requirements for geographical flexibility in chip manufacturing. As part of the agreement, TSMC, the world’s biggest contract chipmaker, would contract turnkey advanced packaging and test services from Amkor at their planned facility in Peoria, Arizona, a joint statement released yesterday said. TSMC would leverage these services to support its customers, particularly those using TSMC’s advanced wafer fabrication facilities in Phoenix, Arizona, it said. The companies would jointly define the specific packaging technologies, such as TSMC’s Integrated
China’s economic planning agency yesterday outlined details of measures aimed at boosting the economy, but refrained from major spending initiatives. The piecemeal nature of the plans announced yesterday appeared to disappoint investors who were hoping for bolder moves, and the Shanghai Composite Index gave up a 10 percent initial gain as markets reopened after a weeklong holiday to end 4.59 percent higher, while Hong Kong’s Hang Seng Index dived 9.41 percent. Chinese National Development and Reform Commission Chairman Zheng Shanjie (鄭珊潔) said the government would frontload 100 billion yuan (US$14.2 billion) in spending from the government’s budget for next year in addition
Sales RecORD: Hon Hai’s consolidated sales rose by about 20 percent last quarter, while Largan, another Apple supplier, saw quarterly sales increase by 17 percent IPhone assembler Hon Hai Precision Industry Co (鴻海精密) on Saturday reported its highest-ever quarterly sales for the third quarter on the back of solid global demand for artificial intelligence (AI) servers. Hon Hai, also known as Foxconn Technology Group (富士康科技集團) globally, said it posted NT$1.85 trillion (US$57.93 billion) in consolidated sales in the July-to-September quarter, up 19.46 percent from the previous quarter and up 20.15 percent from a year earlier. The figure beat the previous third-quarter high of NT$1.74 trillion recorded in 2022, company data showed. Due to rising demand for AI, Hon Hai said its cloud and networking division enjoyed strong sales
Protectionism: US trade chief Katherine Tai said the hikes would help to counter unfair trade practices from China, while boosting domestic clean energy investments US Trade Representative Katherine Tai (戴琪) defended stiff tariff hikes against countries such as China, saying that paired with investment, they were a “legitimate and constructive” tool for reinvigorating domestic industries. Tai’s comments come a week after sharp tariff increases on Chinese electric vehicles (EVs), EV batteries and solar cells took effect — with levies down the line on other products also recently finalized. The latest moves targeting US$18 billion in Chinese goods come weeks before next month’s US presidential election, with Democrats and Republicans pushing a hard line on China as competition between Washington and Beijing intensifies. In an interview on Thursday
RSS