Indonesia Under Pressure to Cut as Outlook Dims: Decision Guide
- Most economists in survey expect Bank Indonesia to lower rates
- Government has warned economy could post zero growth this year
Indonesia’s central bank is expected to resume lowering interest rates after a two-month pause as further signs of a slowing economy pressure policy makers to do more to bolster growth.
Bank Indonesia will cut its benchmark rate by 25 basis points Thursday to 4.25%, according to 15 of 22 economists surveyed by Bloomberg, with the rest expecting no change. In recent months the central bank has kept policy unchanged to support the currency, but a significant deterioration in the economic outlook amid the Covid-19 pandemic is driving expectations that it will add to 50 basis points of cuts from earlier this year.
The government on Tuesday reduced its growth forecast for the year -- the latest in several downward revisions -- and voiced concern over the potential for a second wave of virus infections as the economy reopens. Gross domestic product is expected to contract 3.1% in the second quarter.
“Infections are still rising in Indonesia, and the health care and financial resources to deal with the outbreak remain restrained,” said Charu Chanana, lead Asia economist at Continuum Economics in Singapore. “Bank Indonesia may finally pull the trigger by cutting rates at its June 18 meeting, given the rupiah’s recovery and persistently weak economic momentum.”
Here’s what to look for in Thursday’s decision: