Economics
Indonesia Surprises by Holding Key Rate, Cuts Reserve Ratio
- Central bank lowers rupiah RRR by 200 bps for commercial banks
- Most economists had expected bank to cut benchmark rate too
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Indonesia’s central bank surprised most economists by leaving its key interest rate unchanged Tuesday, while lowering banks’ reserve requirements amid a severe growth slowdown triggered by the coronavirus outbreak.
Bank Indonesia held steady after two consecutive rate cuts this year, leaving its seven-day reverse repurchase rate unchanged at 4.5%. That was in line with the forecasts of nine of 28 economists in a Bloomberg survey; 18 had predicted a 25 basis-point cut, and one saw a 50-point reduction. At the same time, the bank cut the rupiah reserve requirement ratio by 200 basis points for commercial banks and 50 basis points for shariah-compliant lenders.