Indonesia CB Cuts Key Rate

Indonesia’s central bank cut its outlook for 2017 loan growth by banks to 8-10% from an initial forecast of 10-12% after weak lending growth in June, Reuters reported. In June, loan growth fell to 7.7% from a year earlier, the weakest expansion in eight months. Bank Indonesia on Tuesday cut its benchmark rate by 25 basis points to 4.50% to support credit and economic growth. It sees loan growth rising to 10-12% next year. Although economic growth in the second quarter disappointed at 5.01%, the central bank maintained its outlook for 2017 full-year growth at 5.0-5.4%, and 2018 expansion of 5.1-5.5%. Though the figures matched the pace seen in the first quarter, they were slightly weaker than economists had forecast, and did little to address concerns over structural impediments to medium-term growth. However, core inflation in the country–South-East Asia’s largest economy–last month fell to 3.05%, its lowest level since the current measurement system came into use, easing concerns that efforts to stimulate growth could lead inflation to rise too quickly.