JAKARTA, May 21 (Reuters) - Indonesia's central bank cut its key interest rate on Wednesday, as expected by the market, resuming its monetary easing after holding policy steady at its previous three meetings. Bank Indonesia lowered the benchmark 7-day reverse repurchase rate, known as the BI Rate, by 25 basis points to 5.50%, as expected by 20 of 32 economists polled by Reuters. The rest had predicted BI would stand pat.
The central bank also cut its overnight deposit facility and lending facility rates by the same amount to 4.75% and 6.25%, respectively.
"This decision is consistent with the forecast of low and manageable inflation in 2025 and 2026 within target to maintain the stability of the rupiah in accordance with its fundamentals, and to contribute to economic growth," Governor Perry Warjiyo told a press conference.
He said that growth needed to be strengthened to mitigate the impact of U.S. tariffs, and policies were needed to support household demand and exports. Southeast Asia's largest economy grew an annual 4.87% in the first quarter, its weakest pace in more than three years. BI slightly revised down its forecast range for growth this year to 4.6% to 5.4%.
Rating agency Fitch and some analysts have said economic growth of 5% this year would be a challenge given the global trade outlook and the weak first quarter reading.
Jakarta has set a 5.2% growth target this year, and President Prabowo Subianto has pledged to lift growth to 8% by the end of his term in 2029.
BI had cut rates in September last year and again in January. It had then held policy at the next three meetings as market volatility sparked by global trade tensions weighed on the rupiah.
The currency plunged to a record low against the U.S. dollar in April after U.S. President Donald Trump announced global tariffs, but it has since recovered by more than 3%. BI had frequently intervened in the market to steady the rupiah.
Warjiyo said pressure on the rupiah had eased due to improved global market conditions and BI's intervention.
Reporting by Stefanno Sulaiman, Ananda Teresia; Editing by John Mair
Source: Reuters