* Key rate left at 6%, where it's been since Nov
* BI to cut bank RRR to boost liquidity
* BI governor says rate cut a "matter of timing and
magnitude"
* Says U.S.-China trade war main issue for global markets
(Adds Bank of Japan, Taiwan c.bank moves and more details)
By Gayatri Suroyo and Maikel Jefriando
JAKARTA, June 20 (Reuters) - Indonesia's central bank held
its policy interest rate unchanged on Thursday, but moved to cut
the reserve requirement for banks and said it was now appeared a
"matter of timing and magnitude" before it made its first cut in
rates since September of 2017.
Bank Indonesia (BI) left its 7-day reverse repurchase rate
IDCBRR=ECI at 6.00%, in line with the expectations of 19 out
of 22 analysts surveyed by Reuters.
Governor Perry Warjiyo said BI would from July lower the
reserve requirement for banks by 50 basis points to boost
liquidity.
The decision came hours after the Federal Reserve said it was
ready to battle growing global and domestic economic risks with
interest rate cuts beginning as early as next month.
The Bank of Japan later joined the Fed in signalling
readiness to ramp up stimulus. Dovish signals coming from the world's major central banks,
along with rate cuts in other emerging market economies
heightened expectations that Indonesia will join a global switch
to an easier monetary policy.
Southeast Asia's biggest economy missed market forecasts for
its economic growth in the first quarter due to cooling
investment, boosting the case for a rate cut to begin unwinding
last year's tightening. Central banks in India, Malaysia and the Philippines have
all cut rates this year to boost growth. But like Indonesia, the
Philippine held its benchmark rate steady on Thursday while also
saying there was room to ease. Bank Indonesia's Warjiyo said: "we have conveyed that we are
monitoring two things - global financial market conditions and
balance of payments - in considering rate cuts."
"So cutting rates is an action that we will take in the
future. It is a matter of time and magnitude," he told BI's
monthly policy meeting, adding the main issue currently
impacting global markets was the U.S.-China trade war.
Taiwan's central bank also kept policy rate unchanged, but
lowered its 2019 GDP growth outlook amid worries the trade war
will hurt its economy.
Indonesia's rupiah currency IDR= edged up a fraction after
the rate announcement, while the main stock index .JKSE
briefly firmed before ending the day 0.1% down from previous
closing.
Last year, between May and November, BI raised the benchmark
six times by a total of 175 basis points to support the rupiah
IDR= in the wake of U.S. rate hikes by the Fed.
BI's baseline scenario expects the Fed to make no rate moves
this year, Warjiyo said, but he sees a possibility of up to 75
bps cut in U.S. interest rates through 2020 depending on how big
the impact of the trade war is on the U.S. economy.
LIQUIDITY INJECTION
Warjiyo said economic growth was currently on track to be
below the midpoint of its 5.0%-5.4% outlook.
He said efforts were needed to support domestic consumption,
noting the cut in reserve requirements would give the banking
system 25 trillion rupiah ($1.8 billion) of liquidity that they
could use to lend to customers.
Andry Asmoro, chief economist Bank Mandiri, said there now
appeared to be room for BI to cut its benchmark by 25 bps in the
third quarter, "sooner than our previous expectation, which was
in Q419."
He said this would hinge on relatively low and stable
inflation, an improving domestic investment climate, a shrinking
current account deficit and a stable rupiah.
The annual inflation rate accelerated in May to 3.32% on the
back of Ramadan festivities spending, but was still comfortably
within BI's 2.5%-4.5% target range.
Warjiyo said BI still sees the current account deficit in a
range of 2.5%-3% of GDP in 2019, smaller than 2018's 3% gap.
The current account deficit is a source of vulnerability for
Indonesia because it relies on portfolio investment to fund it.
($1 = 14,175.0000 rupiah)