Indonesia's central bank, trying to help speed up sluggish economic growth, on Thursday (Feb 18) cut its benchmark interest rate for the second time this year and lowered the banking sector's reserve requirements in another easing move.
The central bank also cut the reserve requirement ratio by 100 basis points to 6.5 percent and made a small reduction to the rate it pays lenders on overnight deposits, with both moves aimed at encouraging banks to lend more and help lift the economy.
In 2015, the central bank revised down its outlook for loan growth twice as the economy slowed more than it expected and easier lending rules it introduced during the year failed to prop up growth.
The global economic recovery is likely to remain weak though the financial market risk linked to the Federal Reserve interest rate hike has eased, the bank said.
Thirteen of 19 economists surveyed by Reuters predicted BI would cut the key rate basis points to 7.00 percent, following a trim in January of the same size. The new ratio will be effective March 16.
Falling crude prices are helping to curb inflation in Indonesia, giving policy makers room to focus on supporting an economy that expanded previous year at the slowest pace since the end of the financial crisis in 2009.
Warjiyo added that lowering interest rates and reserve requirements together would "make the effect stronger and faster" while stability would be maintained.
The rupiah gained against the greenback along with most ASEAN currencies, except for the Singapore dollar that fell by 0.01 percent.
In a Reuters poll published Thursday, currency traders and analysts turned bullish on the rupiah for the first time since November 2014.
The economy is forecast to grow 5.2-5.6 percent this year, benefiting from accelerated infrastructure project development, Bank Indonesia noted.
Wellian Wiranto, economist at OCBC Singapore, described Thursday's actions as "a multi-front easing while the going is good".
Inflation in Indonesia eased to 4.1 per cent in January from 6.96 per cent recorded a year earlier.
BI's inflation target for this year, as in the past, is 3-5 percent.