Bank Indonesia decides on third rate cut for 2020

Bank Indonesia on Thursday has decided to cut its benchmark rate for the third time this year with signals that it may ease further.

The central bank of SouthEast Asia’s largest economy will cut the 7-day reverse repurchase rate by 25 basis points to 4.25%, marking it as the lowest since 2018. Governor Perry Warjiyo said there was still space for more cuts as long as the currency remained stable.

The decision came a few days after the finance minister warned of recession risks, as the country’s gross domestic product (GDP) is expected to shrink by 3.1% in the second quarter, the first contraction since 1999. He furthered that the GDP could shrink once again in the next three months.

BI lowered its outlook for 2020 GDP growth from 2.3% to 0.9%-1.9% and pledged to keep all of BI’s instruments “accommodative”.

The Rupiah rallied after the announcement before last trading at a little-changed 14,010 per Dollar. The main stock index slipped by 1.3% after the announcement.