Central Bank Rate Cuts in New Zealand, Indonesia and Uruguay
August 20, 2025
Officials at Bank Indonesia sprung a surprise on market participants at today’s scheduled monetary policy review. No interest rate change had been predicted in light of a higher 2.5% inflation rate last month, but instead the policy rate got cut 25 basis points further to 5.0%. The decision, according to a released statement, “is consistent with the persistently low inflation forecast for 2025 and 2026 within the target range of 2.5±1%, the maintained stability of the Rupiah exchange rate, and the need to stimulate economic growth in line with the economy’s capacity.” The interest rate had crested last year at 6.25% from April until September. Officials are hoping to implement additional reductions at future meetings.
The Reserve Bank of New Zealand’s Official Cash Rate was also sliced by 25 basis points. At 3.0% the new rate level constitutes a 36-month low and a drop from 5.25% that existed from May 2023 until an initial easing in August 2024. There have been 7 cuts altogether so far. A released statement stressed the dispersion of opinions among policy makers and uncertainty over future inflationary pressure. Three policy options were discussed: holding the rate as is and cuts of both 25 basis points and even 50 bps. The vote ultimately was between cutting by 25 or 50 bps, and the 4-2 decision favored the smaller move. “Recent increases in food prices and administered prices have contributed to near-term inflationary pressure.” But “if medium-term inflation pressures continue to ease as expected, there is scope to lower the OCR further.”
A 25-basis point interest rate cut occurred in Uruguay as well. The new rate at that central bank becomes 8.75% and is the second such move in seven weeks. The peak of 11.5% was maintained comparatively briefly from December 2022 until April 2023.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank Indonesia, Central Bank of Uruguay, Reserve Bank of New Zealand
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