BI Surprises with Rate Cut

Indonesia’s central bank surprised markets by cutting its benchmark interest rate on Tuesday by 25 basis points to 7.50 percent, its first cut since 2011.

All 20 analysts in a Reuters poll had expected BI would keep the benchmark steady at 7.75 percent, even though Indonesia’s inflation rate has declined and the growth rate is at its lowest in five years.

Economists thought that rates would be held to help contain Indonesia’s current-account deficit, which was nearly 3 percent of gross domestic product (GDP) in 2014, and to discourage capital outflows ahead of a rate hike by the Federal Reserve.


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