JAKARTA, Indonesia—Bank Indonesia unexpectedly cut interest rates Thursday to help spur economic growth, taking advantage of a stable rupiah, benign inflation and the U.S. Federal Reserve's latest decision to keep policy unchanged.
The Indonesian central bank cut its benchmark BI rate by 0.25 percentage point to 6.50% and the seven-day repo rate, which it will use as its new benchmark from mid-August, to 5.25%.
"Bank Indonesia views that the policy easing will help the government's efforts to stimulate the economy," spokesman Tirta Segara said.
The central bank's announcement came after the Fed decided against raising U.S. interest rates at its latest policy meeting, an outcome that generally provides more scope for emerging economies in Asia to cut rates with less concern about possible capital outflows.
Still, many central banks in the region, as well as the Fed, have taken a cautious stance on making major policy moves ahead of potenti al turbulence in global financial markets that could stem from the U.K.'s vote on whether to leave the European Union on June 23.
Ten out of 13 economists polled by The Wall Street Journal had expected the Indonesian central bank to stand pat, while three penciled in a quarter-percentage-point cut.
Besides cutting rates, Bank Indonesia will relax mortgage-lending rules starting August to help bolster economic growth, Mr. Segara said.
Write to I Made Sentana at i-made.sentana@wsj.com
Source: Indonesia Unexpectedly Cuts Interest Rate to 6.5%
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