The Indonesian Bank unleashed its fourth interest rate cut yesterday due to concerns about the trade war. The floor for further key interest rates is still open as decisions will still be based on global and economic data.
The IDR immediately reacted to the news as it gained against the US dollar and other currencies in yesterday’s trading. The Indonesian rupiah took the center stage yesterday in Asian trading as the bank announced the rate cut.
The first pair to go down against the rupiah is the US greenback. The USD IDR exchange rate went down by 0.26% or 36.50 points in Thursday’s trading session.
Meanwhile, the CNY to IDR trading pair dipped 0.55% or 11.049 points in the sessions. And the JPY IDR pair lost 0.85% or 1.1157 points yesterday.
The Indonesian dollar’s outlook still looks promising as the rate cut is aimed to support Jakarta’s economy. The USD IDR exchange rate started to go down on Sunday, days ahead before the bank’s rate slash announcement.
Economic Support
The Indonesian bank’s fourth interest rate cut will help President Joko Widodo push the country’s economic growth. The president’s second term faces a huge challenge way beyond a country’s control; the United States- China trade war.
Although the tension between the two economic stars is starting to ease, the country’s economy slowed down to its slowest pace in two years.
The Indonesian bank lowered its benchmark seven-day reverse repo rate to 5% by 25 basis points. The Indonesian Central Bank remains accommodative; however, further decisions will still depend on the global and local economic data.
In spite of the Indonesian economy’s lackluster performance, the rupiah remains stable against the US dollar. The currency continues to hold itself against the greenback and other major forex players in sessions this month.
Yesterday’s decision is also in line with other central banks in the region like the Philippines, India, and South Korea.
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