- BI cut policy rate by 25 bps and the Fed by 50 bps, both faster than expectations.
- While the rapid cuts may be construed as sign of panic about growth outlook, both economies (US and Indonesia) are not facing urgent threats of recession as yet.
- The mixed conditions (contraction in tradable sectors, decent growth in non-tradables) indicate that the current global slowdown may be greatly influenced by China’s economic imbalance.
- The very fact that rate cuts are unlikely to remedy to situation may, paradoxically, push central banks to cut more rapidly in the short-term.
- BI has less room to ease compared to the Fed, and the one big lever it still has – the unwinding of SRBI – would have to be wielded gradually due to potential effects on Rupiah.
