Indonesia surprises with cut in key interest rate
Source: Bloomberg News |
October 12, 2011, Wednesday
|
Print Edition
Print Edition
INDONESIA'S central bank unexpectedly cut its benchmark interest rate for the first time in more than two years to spur growth as the global recovery weakens and inflation slows.
Bank Indonesia lowered the reference rate by a quarter of a percentage point to 6.5 percent, Governor Darmin Nasution said in Jakarta yesterday. All of the 15 economists surveyed by Bloomberg News expected no change.
Emerging-market nations have boosted measures to drive growth, as a struggling United States recovery and deepening European crisis threaten the global economy. Brazil, Turkey, Russia and Pakistan have cut borrowing costs in 2011, while Asian countries from the Philippines to South Korea have refrained from further interest-rate increases in recent weeks.
"As growth weakens, the policy makers elsewhere in the region may well follow a similar path," said Edward Teather, an economist at UBS AG in Singapore.
"We do actually forecast lower policy rates for Malaysia, Thailand and the Philippines" over the next six months, Teather said.
The Jakarta Composite Index has fallen 11.7 percent in the past month, the most in Asia, as investors pare bets on emerging markets. The rupiah slid about 4.3 percent against the dollar in the same period, according to data compiled by Bloomberg News. Bank Indonesia said yesterday it has sufficient foreign-exchange reserves to support the rupiah.
Indonesia joins Malaysia and the Philippines in stepping up efforts to shield growth from the global slowdown.
The Philippines approved a fiscal stimulus package on Monday, while Malaysia's annual budget, unveiled last week, will distribute cash to low-income families, raise wages for civil servants and boost spending on transport.
Bank Indonesia lowered the reference rate by a quarter of a percentage point to 6.5 percent, Governor Darmin Nasution said in Jakarta yesterday. All of the 15 economists surveyed by Bloomberg News expected no change.
Emerging-market nations have boosted measures to drive growth, as a struggling United States recovery and deepening European crisis threaten the global economy. Brazil, Turkey, Russia and Pakistan have cut borrowing costs in 2011, while Asian countries from the Philippines to South Korea have refrained from further interest-rate increases in recent weeks.
"As growth weakens, the policy makers elsewhere in the region may well follow a similar path," said Edward Teather, an economist at UBS AG in Singapore.
"We do actually forecast lower policy rates for Malaysia, Thailand and the Philippines" over the next six months, Teather said.
The Jakarta Composite Index has fallen 11.7 percent in the past month, the most in Asia, as investors pare bets on emerging markets. The rupiah slid about 4.3 percent against the dollar in the same period, according to data compiled by Bloomberg News. Bank Indonesia said yesterday it has sufficient foreign-exchange reserves to support the rupiah.
Indonesia joins Malaysia and the Philippines in stepping up efforts to shield growth from the global slowdown.
The Philippines approved a fiscal stimulus package on Monday, while Malaysia's annual budget, unveiled last week, will distribute cash to low-income families, raise wages for civil servants and boost spending on transport.
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