Indonesia’s central bank cut its policy rate for the first time in four months, urging banks to lend more to help drive an economic recovery.
Bank Indonesia cut its seven-day reverse repurchase rate by 25 basis points to 3.75%, the lowest since the benchmark was introduced in 2016, as predicted by 11 of 26 economists surveyed by Bloomberg.
“I can assure you that the economic recovery will continue,” Governor Perry Warjiyo said. “We encourage banks and the business community to build optimism so the economic recovery can continue, and at a quick pace.”
The rate cut comes after Southeast Asia’s biggest economy contracted more than expected last quarter, falling into its first recession since the Asian financial crisis more than two decades ago. Policy makers hope the economy can eke out some growth in the fourth quarter, even though recent vital indicators — including consumer confidence, retail sales, imports and manufacturing — suggest that will be difficult.
Warjiyo’s comments announcing the decision “actually point towards a fairly sanguine picture on the growth outlook, but the action to cut rates once again after a three-month hiatus, perhaps point toward the weight given to downside risks,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp in Singapore.