TEMPO.CO, Jakarta - Bank Indonesia (BI) finally decided to cut the benchmark interest rate after maintaining it at 6.00 percent for the last eight months. The central bank's board of governors' meeting for the month of July resulted in a decision to cut the 7day reverse repo rate (7DRRR) by 25 bps to 5.75 percent.
The decision was made based on two major factors; healthy inflation rate and the need to boost domestic growth.
BI Governor Perry Warjiyo said the central bank concluded that ongoing trade tensions "continue to pressure international trades and slowing down the global economy".
The BI Rate cut was also decided after taking into account the declines of the SUN (state bonds) coupons and the US treasury yields.
Yesterday, a market consensus lead by Bloomberg predicted that BI would cut the 7DRRR by 25 bps. Of the 33 economists surveyed, 27 predicted the cut correctly, while six others said BI would maintain the interest rate at 6.00 percent.