Bank Indonesia hasn’t cut its policy rates this quickly since 2019. Today, the Board decided to cut the BI-rate and the lending facility rate by 25bps and the deposit facility rate by 50bps. That returns the lending - deposit rate spread to 1.75%, where it was immediately after the reform of the policy framework in 2017. (It’s been 1.50% since October 2017.)

This is the third consecutive monthly Board meeting to approve a rate cut and the fourth in five months. They didn’t even cut rates this fast in 2020. In 2019, they cut in four consecutive meetings. Prior to that, you have to go back to 2009 to see the policy rate being cut at this kind of frequency.

And yet Indonesian export growth, at least through July, is around 12% and rising. Exports to the US rose 44% in July! Bank credit to corporates is growing around 11%. Household borrowing is weak — about 4% — but hardly an emergency. Headline inflation is rising but core inflation is falling and both are just below the mid-point of the target range.

BI is committed to coordinating policy with the government. That’s nothing new. The statement expresses confidence in household consumption — not suffering from the decline in household confidence — and says that what the economy needs is more investment. But lending to corporates has rarely been stronger. Q2 fixed capital formation growth of 7% was well above the pre-Covid average. By most metrics, there’s no need for the kind of aggressive easing from BI that we’re seeing.