Indonesia Rate Cut Depends on Timing, deputy Governor Says

10-Jun-2019 Intellasia | Bloomberg | 6:00 AM Print This Post

Indonesia’s central bank is discussing the possibility of cutting interest rates but is waiting for the right time to do so, deputy Governor Dody Waluyo said.

Given the uncertainty in financial markets, the central bank needs to be “cautious” and a rate cut “will depend on the timing,” Waluyo said in an interview with Bloomberg Television’s Kathleen Hays in Japan on Friday. Policy makers are monitoring the economic data closely to assess when they can move, he said.

“We are calculating from time to time the possibility to cut rates,” he said. “Hopefully we will do it later on.”

Global central banks are shifting to more looser monetary policy to bolster their economies in the face of a growth slowdown. The Reserve Bank of India on Thursday cut its benchmark rate for a third time, while Australia, New Zealand, the Philippines and Malaysia have also eased in recent weeks.

Indonesia’s policy makers are treading more carefully to avoid undermining the currency. Bank Indonesia raised interest rates six times last year to bolster the rupiah after it came under attack during an emerging-market rout.

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“The policy rate is determined not only by how we are able to address the inflation rate within our target, but also how we address the stability of the rupiah, and the factors behind the rupiah mostly come from the external side,” Waluyo said.

Governor Perry Warjiyo hinted at rate cuts at last month’s policy meeting, saying the central bank will consider whether there’s room to ease, while remaining vigilant of global market risks and maintaining external stability.

Waluyo said the policy rate is only one of the tools available to support the economy, and the central bank will also use macroprudential measures and liquidity instruments as it did last year.

On domestic growth prospects, Waluyo said the US-China trade war will have a “significant impact” on the economy, with non-oil export growth already under pressure. There are some possible positive spinoffs, such as lower food prices as a result of cheaper soybean imports from the US and increasing textile exports to America, he said.

Waluyo also made the following comments in the interview:

“S&P just upgraded our sovereign credit risk. It gives sentiment and confidence to the market. The result of the election is also positive for the market.””We have to be cautious in terms of the policy rate. We want to be hawkish in the policy rate, but then we are accommodative in other instruments, like macroprudential, financial market deepening, coordination with government in terms of structural reform.””Banks should still improve bank loans. That’s the point why Bank Indonesia is being accommodative in macroprudential policy. We want banks to give loans more because we want to maintain the momentum of growth.”


Category: Indonesia

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