By Rahul Trivedi
BENGALURU (Reuters) -A bare majority of economists polled by Reuters expect Bank Indonesia (BI) to cut interest rates on Wednesday, while a wider majority expects it will do so by the end of the quarter.
At its June meeting the central bank signalled it was open to further rate cuts to spur spending and investment, citing manageable inflation. Governor Perry Warjiyo said the timing would depend on global conditions concerning the stability of the rupiah.
Since then the rupiah has strengthened about 0.5% and headline inflation rose to 1.87% in June, comfortably within Bank Indonesia’s 1.5% to 3.5% target range.
However, uncertainty from U.S. President Donald Trump’s renewed tariff threats, including a new August 1 deadline, has left economists divided.
In a July 7–14 Reuters poll, 15 of 29 economists forecast BI will cut its benchmark seven-day reverse repurchase rate by 25 basis points to 5.25% at its July 16 decision. The remaining 14 expected it will hold steady for now at 5.50%.
Of 26 economists who gave a longer-term view, 21 expected the benchmark rate to be 5.25% by the end of this quarter, and 13 anticipated a further 25 bps cut to 5.00% by year-end.
“Conditions have turned more conducive since BI’s pause at its last meeting in June, with the USD/IDR reasonably stable,” said Krystal Tan, an economist at ANZ. “BI has a clear easing bias and has repeatedly signalled it is on the lookout for scope to further lower rates.”
Still, she added: “The key risk to our forecast is if risk sentiment deteriorates sharply, with potential triggers including tariff disappointment and/or a much stronger-than-anticipated U.S. CPI print.”
A majority of those who gave predictions about two other rates, the overnight deposit and lending facility rates, also expected cuts by 25 basis points on Wednesday, to 4.50% and 6.00%, respectively.
Economists said a rate reduction would reflect concerns about the impact of a potential 32% U.S. tariff on Indonesian goods if no trade deal is reached by Trump’s August 1 deadline.
“The impact for BI will be through heightened volatility and persistent uncertainty if tariff implementation is delayed and negotiation outcomes are unknown,” said Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank.
“If tariff rates are finalised and implemented, BI policy will need to support growth, which is already slowing.”
The poll also showed Indonesia’s economy was expected to grow an average 4.8% in 2025 and 4.9% in 2026, unchanged from earlier projections, though economists trimmed their forecasts after the initial U.S. tariff announcement on April 2.
Inflation was projected to average 1.8% in 2025 and 2.6% in 2026.
(Other stories from the July Reuters global economic poll)
(Reporting by Rahul Trivedi; Polling by Susobhan Sarkar and Pranoy Krishna)
