Bank Indonesia Cuts Rates for Second Month to Aid Recovery

Bank Indonesia lowered its key interest rate for a second straight month, aiming to help the economy recover from the devastating impact of the coronavirus pandemic.

A spurt in coronavirus cases across the archipelago has clouded the timeline for resuming normal economic activity and weighed on household consumption, which makes up almost 60% of Indonesias economy. The central bank said last month it expects the economy to grow just 0.9%-1.9% this year, and with demand sluggish, retail inflation has slumped to a two-decade low.

The rate cut may weigh on the rupiah, which has rebounded about 12% against the dollar since hitting a 22-year low in March, but has been the worst performer in Asia over the past month. Warjiyo said Thursday the currency has been pressured by global uncertainty, adding that its undervalued and has room to appreciate.

The central bank has said the outlook for the current-account deficit, a perennial weakness for Indonesias economy, is improving, with the country posting a trade surplus of more than $5 billion in the first half of the year and foreign investors being net buyers of government bonds in the past three months.