Central Bank of Indonesia decrees unexpected reduction in interest rates
In a surprise move, Bank Indonesia has lowered the benchmark seven-day reverse repurchase rate by 25 basis points, bringing it down to 5%. This is the fifth rate cut since September, and the lowest rate since late 2022.
The decision to lower the interest rate was made in light of the projected slowdown in GDP growth for 2025, as well as the continued low inflation forecast for 2025 and 2026. The stability of the rupiah and the subdued inflation rate were also factors in the decision.
According to Capital Economics, a London-based business research center, the rate reduction is a response to the projected slowdown in GDP growth. Jason Tuvey, an analyst from Capital Economics, predicts that the seven-day reverse repurchase rate will be lowered to 4.50% by the end of the year. He also believes that there is room for further rate easing in 2023.
Indonesia recorded more than 5% growth in Q2 after setting an ambitious goal of 8% economic growth. However, GDP growth is likely to slow down, according to Capital Economics' predictions. The rate reduction decision could be indicative of a more accommodative monetary policy stance in response to the projected slowdown in economic growth.
Bank Indonesia's decision to lower the interest rate is intended to promote economic growth amid inflation remaining within the target range. The central bank has been consistent in its efforts to support the economy, even if it means deviating from economist predictions.
It is worth noting that the predicted benchmark seven-day reverse repurchase rate for Indonesia at the end of 2023 is not explicitly stated in the current search results. However, recent data from 2025 shows Bank Indonesia cut the rate to 5.0% in August 2025 after several reductions starting in late 2024 and early 2025. For precise historical or predicted rates at the end of 2023, more specific data or forecasts from late 2023 sources would be needed.
In summary, Bank Indonesia has lowered the benchmark seven-day reverse repurchase rate to 5% in an effort to boost economic growth amid a projected slowdown in GDP growth. Capital Economics' Jason Tuvey expects more rate cuts over the remainder of the year, with the seven-day reverse repurchase rate potentially reaching 4.50% by the end of the year. However, the predicted rate specifically for the end of 2023 is not provided in the search results.
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