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Indonesia unexpectedly lowers reference rate to 6.50%

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Economy in Asia   Indonesia reduced the rate by cumulative 100 bps

The Board of Governors of Bank Indonesia, led by Governor Agus Martowardojo, decided to lower the reference rate to 6.50 percent from 6.75 percent. The bank had reduced the rate by cumulative 100 basis points so far this year.

Similarly, the 7-day repo rate was reduced to 5.25 percent from 5.50 percent.

The bank trimmed its lending facility rate to 7.00 percent from 7.25 percent and the deposit facility rate, known as FASBI, to 4.50 percent from 4.75 percent, with effect from June 17.

The central bank is set to switch its key policy rate to the seven-day reverse repo rate from the reference rate in August.

Gareth Leather, a senior Asia economist at Capital Economics said more easing is likely this year, although worries about the high level of foreign currency debt and the strength of the rupiah mean the pace of future rate cuts is likely to be gradual.

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