Yet another surprise rate cut, but one that we feel was too much, too soon. The inflation jump that we pointed out in our last report remains a concern, and the reason we’re not convinced of the wisdom of this latest rate cut so soon after another. Widespread social unrest, centered around political grievances, engulfed the nation as August drew to a close.
Tariffs & GDP Effects
As we reported last month, the US and Indonesia concluded tariff negotiations with the new regime commencing on August 7th; a uniform 19% US tariff is now being applied to Indonesian goods entering the US, the same rate being applied to Philippine, Cambodian, Malaysian and Thai goods. At the same time as it announced the interest rate cut (see below), Bank Indonesia (BI) pointed to data showing that economic growth had accelerated to 5.12% in Q2 ’25 – the fastest growth in two years – and driven by household spending and investment. Whilst some concern persists over the impact weakening domestic demand, an...
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