- BI unexpectedly cut its policy rate to 5.75% due to concerns over weak growth prospects even amidst worsening sentiment in the global market.
- Lower real rates can improve private liquidity and demand, albeit at the cost of a wider current account deficit and weaker Rupiah.
- BI will need to navigate between the risk of either disinflationary or depreciation spiral, meaning that it would take a tactical approach to its monetary policy.
- Increased minimum repatriation period on export proceeds from 3 months to 12 months can help bolster BI's ammunition against uncontrolled depreciation.
- Improved domestic liquidity and BI's secondary market purchase should reduce SBN yield volatility, crucial given high interest burden and increased bond vigilantism globally.
