Indonesia’s Central Bank continued rate cuts; good for the economy

On 19th September BI (Bank Indonesia) cut interest rates by another 25bps to 5.25%. Recent cut was the 3rd time within the current quarter, while one more interest rate reduction is widely expected by end of the year.

Lower interest rates should be beneficial to many different cyclical sectors such as housing, financial sector, private consumption and construction. Real estate sector has been showing increasing signs of life after the election period in April-May, however, foreigners have also been more active in industrial investments what can be seen rising demand from business park land inquiries.

In addition, recent corporate visits in September in Jakarta support our view that political risks have diminished considerably – none of the companies that we met with, did not view politics as a major risk factor.

Next major event in Indonesia will be the announcement of the new government in late October.