INDONESIAS central bank has room to cut interest rates further based on inflation and economic growth forecasts, but would monitor global dynamics and the movement of the rupiah exchange rate to determine future easing moves, its governor said.

Governor Perry Warjiyo told a press conference on Friday (Jan 24) he believed the rupiah would stabilise with a strengthening bias going forward, with the governments new policy to make exporters retain foreign currency earnings for longer onshore expected to increase domestic US dollar supply.

The office of the Coordinating Ministry for Economic Affairs has said the plan to make resource exporters keep all of their proceeds at home for at least a year could increase Indonesias foreign exchange reserves by US$90 billion per year, even though some analysts said the figure was too optimistic.

From inflation and economic growth perspective, there is room to cut interest rates. From the perspective of exchange rate, we’re aiming for stability, said Warjiyo.

The fundamentals, including the earnings retention rules, are giving support for (rupiah) stability. But the main problem is global dynamics, which we will have to monitor from time to time, he added.

Bank Indonesia unexpectedly cut policy rates earlier this month, resuming an easing cycle it started in September to prop up growth in South-east Asia’s largest economy.

Warjiyo at the time has said BI would monitor for space to further support economic growth, signalling the easing cycle was not over.

Source : www.businesstimes.com

Jan 25, 2025