BENGALURU— Bank Indonesia (BI) will resume its easing cycle on Wednesday with a quarter-point interest rate cut as the rupiah’s recent strength gives the central bank room to focus on supporting economic growth, a Reuters poll of economists found.
Southeast Asia’s largest economy grew 4.87 percent last quarter, its slowest pace in three years, while the rupiah recovered from April losses, easing pressure on BI to keep monetary policy tight. April inflation rose to be within the central bank’s 1.5 percent-3.5 percent target range, official data showed.
The bank has kept interest rates unchanged for the past three months. BI Governor Perry Warjiyosaidin April the central bank’s short-term priority was to stabilise the currency, saying: “Once stability is maintained, the room for a rate cut will be more open and that would be the time to decide on future interest rate policy.”
Since then, the rupiah has strengthened over 2.4 percent against the US dollar.
More than 60 percent of economists, 20 of 32, in a May 14–19 Reuters poll forecast BI will cut its benchmark seven-day reverse repurchase rate by 25 basis points to 5.50 percent on May 21. The remaining 12 expected no change from 5.75 percent.
The overnight deposit and lending facility rates were also forecast to be lowered by 25 basis points to 4.75 percent and 6.25 percent, respectively.
“After an extended pause, BI is expected to lower rates in May, tapping into the recent window of currency appreciation as well as an improvement in risk appetite after the recent US-China bilateral tariff cuts,” said Radhika Rao, senior economist at DBS Bank.
Among those who provided a longer term outlook on rates, 55 percent of economists, 15 of 27, expected the key rate to be 5.25 percent by the end of the third quarter. Beyond that, there was no clear consensus among economists on where rates would be.
Projections for 2025 varied widely, with some economists expecting just a 25 basis points cut and others predicting as much as 100 basis points of easing.
