(Jakarta/Manila – Combined News) The central banks of Indonesia and the Philippines announced their interest rate decisions on Thursday (February 19). Facing depreciation pressure on the rupiah, Bank Indonesia kept rates unchanged for the fifth consecutive month to support the currency; meanwhile, the Philippines opted to cut rates for the sixth time to stimulate growth after a major flood control project corruption scandal severely dampened economic confidence.
Bank Indonesia announced it would maintain its benchmark seven-day reverse repo rate at 4.75%, in line with market expectations, aiming to address the rupiah's recent volatility as it hovers near historic lows. Bank Indonesia Governor Perry, in an online press conference, pointed out that the rupiah is currently undervalued due to global market fluctuations. He emphasized that based on fundamentals such as inflation and economic growth, the rupiah should be stronger.
Perry stated that once currency pressures ease, the central bank will consider resuming rate cuts. He also expects that, boosted by government stimulus measures, increased consumption during major religious holidays, and improvements in public spending and corporate confidence, economic growth will strengthen in the first quarter of this year. However, concerns among investors over President Prabowo's high-growth agenda impacting fiscal health and central bank independence, combined with issues of stock market transparency, continue to undermine the appeal of Indonesian assets.
Meanwhile, the Philippine central bank decided to cut its interest rate by 25 basis points to 4.25%. This is the sixth rate cut since August 2024, totaling a reduction of 225 basis points. Bangko Sentral ng Pilipinas Governor Remolona stated that the flood control project corruption scandal at the end of last year led to a decline in investor and consumer confidence, affecting economic performance—the central bank had underestimated its impact. He emphasized that the central bank will continue to support economic growth within the limits permitted by inflation.
Philippine economic growth last quarter was only 3%, making it one of the slowest in Southeast Asia. The central bank noted that supply-side pressures have led to a slight upward revision of this year's inflation expectations, but this is expected to be temporary, with inflation likely to return close to the 3% target range by 2027.
Perry stated that once currency pressures ease, the central bank will consider resuming rate cuts. He also expects that, boosted by government stimulus measures, increased consumption during major religious holidays, and improvements in public spending and corporate confidence, economic growth will strengthen in the first quarter of this year. However, concerns among investors over President Prabowo's high-growth agenda impacting fiscal health and central bank independence, combined with issues of stock market transparency, continue to undermine the appeal of Indonesian assets.
Meanwhile, the Philippine central bank decided to cut its interest rate by 25 basis points to 4.25%. This is the sixth rate cut since August 2024, totaling a reduction of 225 basis points. Bangko Sentral ng Pilipinas Governor Remolona stated that the flood control project corruption scandal at the end of last year led to a decline in investor and consumer confidence, affecting economic performance—the central bank had underestimated its impact. He emphasized that the central bank will continue to support economic growth within the limits permitted by inflation.
Philippine economic growth last quarter was only 3%, making it one of the slowest in Southeast Asia. The central bank noted that supply-side pressures have led to a slight upward revision of this year's inflation expectations, but this is expected to be temporary, with inflation likely to return close to the 3% target range by 2027.