Indonesia seen to cut rate twice this year amid US tariff talks
Economists predicted a quarter-point reduction in Bank Indonesia's benchmark rate to 5.5% by the end of the second quarter, according to the latest Bloomberg survey. They see a further 25-basis point cut in the third quarter, which will lead the terminal rate to 5.25% toward the year-end.
Consumer inflation could also be more moderate than expected. The headline gauge is projected to be 1.8% for the second quarter, lower than the earlier forecast of 1.9%, which should pare down the full-year print to 2% from 2.1%.
The planned 32% US tariffs on Indonesian goods prompted economists to lower economic growth forecasts this year to 4.8% from 5% previously. 'Key downside risks to growth could stem from the implementation of the higher-band reciprocal tariff on Indonesia after the current 90-day pause', said Lloyd Chan, strategist at MUFG bank.
The Indonesian government is currently negotiating with Washington to avert the tariffs that are seen to hit the exports sector. In an early warning sign of the tariff fallout, a measure of Indonesian manufacturing activity fell to its lowest since 2021, with factories cutting production and jobs in April.
Indonesia has pledged to increase its energy and agriculture imports from the US, as well as increase cooperation for the supply of critical minerals in the trade talks. Still, the government underlined it will put forward national interests as the US pushes for Indonesia to deregulate investments and ease market access.
The Indonesian rupiah fell to an all-time low against the dollar last month, triggered by a selling spree in global financial assets as an impact of rising trade frictions around the globe. 'The rupiah, already near its lowest level since the Asian financial crisis, may come under additional pressure, and potentially require further intervention by Bank Indonesia,' said Ahmad Mobeen, senior economist at S&P Global Market Intelligence. –BLOOMBERG
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Malaysian Reserve
an hour ago
- Malaysian Reserve
Mowilex models environmental leadership with new Cikande factory solar panels: for every 4 liters of Mowilex paint, 1 is now powered by the sun
Key news highlights: With new solar panels at its Cikande factory, Mowilex has expanded its commitment to renewable energy, efficiency and the environment. The installation will lower the company's carbon footprint and cut grid electricity use by up to 25% per year. Mowilex earned its sixth consecutive CarbonNeutral® company certification in late 2024, and further supports Indonesia's clean energy goals with this solar project. JAKARTA, Indonesia, July 4, 2025 /PRNewswire/ — With the installation of solar panels at its Cikande factory, PT Mowilex Indonesia (Mowilex) is expanding its long-standing commitment to clean, renewable energy. Mowilex was Indonesia's first paint company to make major solar investments, demonstrating environmental leadership by first installing panels at its corporate headquarters in 2022. Over 500 solar modules now cover the roof of the main Cikande factory building. Another 252 solar modules were installed on car and motorcycle parking canopies. The system will reduce grid electricity use at the company's Cikande factory by approximately 500 kilowatt-hours (kWh) annually – and that means 1 of every 4 liters produced will be made with renewable energy. With the Cikande solar panels, Mowilex will lower its operational carbon footprint and cut non-renewable energy use by up to 25% per year. The company's new renewable energy project advances Indonesia's clean energy goals and comes just months after Mowilex earned its sixth consecutive CarbonNeutral® company certification. 'We believe in taking real action to decarbonize. This solar installation at our Cikande factory goes beyond buying offsets, and it's more than a technological upgrade. It is a reflection of our core values. As a company rooted in environmental responsibility, this initiative brings us one step closer to a cleaner future for Indonesia,' says Niko Safavi, CEO of PT Mowilex Indonesia. Through its investment in solar projects, Mowilex is actively reducing its dependence on brown energy. In contrast to brown energy, derived from fossil fuels and associated with high emissions and environmental harm, green energy represents a cleaner, renewable alternative. This strategic transition enables Mowilex to adopt a more stable, self-sufficient and environmentally responsible energy solution. The expanded use of solar also aligns with the environmental and ethical expectations of Indonesian consumers. Climate change worries 87% of Indonesians, says the global communications firm Edelman, and more than 90% of Indonesians think businesses don't do enough engagement around climate change issues. Another 90% expect CEOs to take a public stance on climate change. Mowilex embraces the opportunity to educate and deliver solutions to climate challenges through its products and practices. 'We see consumers shifting their purchasing power toward brands that actively work to mitigate climate change. Mowilex is proud to meet those market expectations,' says Safavi. 'Solar is a reliable, independent power source that contributes to our energy security and supports Indonesia's renewable energy policies. By making this long-term investment, we hope to be a model for industry and for the greater public.' Learn more about Mowilex sustainability programs and products at About PT Mowilex Indonesia PT Mowilex Indonesia (Mowilex), a subsidiary of Asia Coatings Enterprises, Pte. Ltd., is a leading producer of premium paints and coatings. Since launching the first Indonesian-made, water-based paints in 1970, the company has expanded its commitment to environmental ethics, equality, community and innovation. PT Mowilex is Indonesia's only certified carbon neutral manufacturer, producing zero and low VOC paints in modern colours, and the company regularly wins awards for its corporate social responsibility and sustainability efforts. Media contact: media@ Visit the Mowilex website for product and sustainability information.
The Sun
2 hours ago
- The Sun
South Korea may ask US to extend tariff freeze
SEOUL: South Korea's Trade Minister Yeo Han-koo said yesterday that he might request an extension of the freeze on US tariffs that is set to expire within days when he heads to Washington for talks with US officials. Yeo, who became South Korea's new trade envoy last month, is due to fly to the US yesterday and plans to hold talks with US Trade Representative Jamieson Greer and other senior officials today, just ahead of the July 9 deadline when US tariffs could rise sharply. US President Donald Trump said his administration would start sending letters yesterday to countries specifying what tariff rates they will face on imports into the US. Yeo said the substance of negotiations mattered more than the deadline, noting he would ask the US to take time and accelerate talks to reach a 'win-win' deal. South Korea has sought exemptions from Trump's punishing tariffs on imports of automobiles and steel products, as well as a 25% 'reciprocal' levy on the Asian ally currently paused for negotiations. The government of Asia's fourth-largest economy, which is currently subject to a blanket 10% tariff, agreed with the US in their opening round of trade talks in late April to craft a trade deal reducing tariffs by the July deadline. However, negotiations appear to have made little progress and were hampered by political uncertainty over the last few months following South Korea's martial law crisis with President Lee Jae Myung elected as the new leader on June 3. President Lee said on Thursday that the ongoing talks between Seoul and its ally Washington had 'not been easy', adding the two sides were not clear on what they want. Washington is demanding better access to the agriculture and car sectors, and improved market access and non-discriminatory treatment in the digital sector, Minister Yeo told a parliamentary hearing yesterday. 'The government will respond flexibly by taking into account the level of the US demands and domestic political security sensitivities,' Yeo said. Yeo also said that the US was asking for larger investments by South Korean companies in the country and increased South Korean purchases of US energy supplies. Although South Korea has shown interest in a US$44 billion (RM185 billion) LNG project in Alaska, Yeo said the feasibility of the project was still not clear and the US would only provide more information later in the year. South Korea's efforts to reach a trade deal come as Trump said Vietnam and the US had agreed on a 20% tariff rate on imports from Vietnam, down from an initial 46% rate he threatened. Yeo said South Korean companies that use the Southeast Asian country as a manufacturing base would be affected by those tariffs. – Reuters
The Star
3 hours ago
- The Star
Asian markets mixed as Trump warns tariff letters to be sent soon
HONG KONG: Asian investors trod cautiously on Friday (July 4) as Donald Trump's deadline to avert his steep tariffs approached, with the US president saying he planned to start sending letters informing trading partners of their rates. Uncertainty leading up to next week's cut-off tempered the positive lead from another record on Wall Street, where a forecast-busting US jobs report soothed worries about the world's top economy. Governments around the world have fought to hammer out deals with Washington ahead of the July 9 deadline, set after Trump unveiled a blitz of levies on his "Liberation Day" in early April. He and his top officials have said several were in the pipeline, but only Britain and Vietnam have signed pacts while China has agreed to a framework for it and the United States to slash tit-for-tat tolls and ship certain products. While negotiators continue to seek ways to avert the worst of the White House's measures, Trump warned Thursday he would soon be issuing his messages to capitals. "My inclination is to send a letter out and say what tariff they're going to be paying," he told reporters. "It's just much easier." He added: "We're going to be sending some letters out, starting probably tomorrow, maybe ten a day to various countries saying what they're going to pay to do business with the US." The prospect that trading partners from Japan and South Korea to India and Taiwan could be hit with stiff tariffs fuelled fresh worries about the global economy. Tokyo edged up with Shanghai, Sydney, Wellington and Jakarta but Hong Kong, Seoul, Singapore, Taipei and Manila fell. Traders were unable to pick up the baton from their New York colleagues, who sent the S&P 500 and Nasdaq to more record closes ahead of the Independence Day break. Those gains followed data showing the US economy topped expectations to add 147,000 jobs in June while unemployment dipped to 4.1 per cent from 4.2 per cent, which was also better than estimated. The reading was taken as a sign the labour market remained in rude health despite warnings about the impact of Trump's tariffs. It also dented hopes that the Federal Reserve will cut interest rates at its next meeting this month, with bets now on two reductions before the end of the year - the first likely in September. However, analysts suggested that all was not what it seemed, pointing to softness in the private sector. "We think that private-sector hiring has stalled, and we may see sporadic layoffs in some industries in the coming months," warned analysts at MUFG. "Despite the unemployment rate having fallen... the flow of potential workers that remained out of the labour force rose sharply in June (and over 750,000 have dropped out of the labor force over the past two months), further highlighting the weak hiring environment. "We continue to view labour demand as being fundamentally weak relative to the past several years." The passage of Trump's "Big, Beautiful Bill" also left investors in a quandary as they weighed the extension of huge tax and spending cuts with forecasts that it will add around US$3 trillion to the already ballooning national debt. Still, it included a US$5 trillion increase in the debt limit, removing the risk the country could default on its bond payments. - AFP
