USD/IDR Price News: Indonesian rupiah bounces-off two-month low on BI’s expected rate cut

At its July monetary policy meeting on Thursday, Indonesia’s central bank, Bank Indonesia (BI), cut its 7-day reverse repo rate by 25bps to 4.00%, in line with expectations. The central bank cut the interest rates for the fourth time this year, ramping up efforts to fight the coronavirus pandemic-led economic blow.

A majority of economists polled by Reuters expected the central bank will trim the key rate to 4.00%, the lowest since at least 2016 when it adopted the rate as its benchmark.

The central bank Governor Warjiyo noted that the economy will continue to contract in the second quarter.

Additional comments:

Rising geopolitical tension between US and China increases financial market uncertainty.

Economic activity improves in June in line with easing of restrictions.

Capital inflows seen continuing despite some slowdown in early July.

Rupiah exchange rate moving towards fundamental value.

Rupiah still has room for appreciation against the US dollar.

To continue work to maintain inflation within 2%-4% target.

BI has injected 633.24 trillion rupiah of liquidity into financial system.

Hopes monetary expansion that so far has remained within banking system can be channeled to economy.