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Investing.com -- Bank Indonesia (BI) reduced its benchmark 7-day reverse repo rate by 25 basis points to 5.00% on Wednesday, a decision that caught most analysts off guard.
Only five out of 29 analysts surveyed by LSEG had predicted the central bank would ease monetary policy at this meeting. The rate cut appears to be motivated by BI’s desire to support economic growth, particularly as inflation remains subdued and GDP growth is expected to slow.
With inflation under control and assuming the rupiah maintains its stability, there may be room for additional monetary easing in the coming months.
The Indonesian government recently presented its draft 2026 budget, which projects a narrower deficit of 2.5% of GDP. However, analysts warn that this projection relies on optimistic revenue forecasts and significant reductions in transfers to local governments, which could face resistance.
Any concerns about the government potentially exceeding the 3% of GDP deficit limit could put pressure on the rupiah’s value.
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