* Cuts by Bank of Korea, Bank Indonesia first in years
* Leaders of both c.banks signal there's more room for
easing
* S.Korea cuts growth forecast, sees impact from row with
Japan
SEOUL/JAKARTA, July 18 (Reuters) - South Korea and Indonesia
cut their benchmark interest rates for the first time in years
on Thursday, not waiting for an expected reduction soon in U.S.
rates as they aim to help borrowers cope with mounting risks to
economic growth.
The Korean cut, unlike the Indonesian one, surprised
economists who anticipated a move by Seoul only after a Federal
Reserve's policy decision due on July 31. And both left the door
open for further easing.
Global risks are on the rise as the Sino-U.S. trade war
drags on, dampening business confidence and deterring
investment, and Asian economies are feeling additional pressure
as China's growth cools to near 30-year lows.
Both Indonesia and South Korea cut main rates by 25 basis
points (bps).
Deutsche Bank said it expects others in Asia to follow, in
response to tepid growth and limited inflationary pressure,
adding that Bank Indonesia and the Philippine central bank could
be "the most aggressive".
Later on Thursday, another emerging market central bank -
South Africa's - is expected to trim its rates.
A spate of rate decisions are due in Asia in early August.
One is due from Manila's Bangko Sentral ng Pilipinas, which has
made one cut this year, on Aug. 8. India's central bank, which
has cut three times in 2019, meets on Aug. 7, as does the Bank
of Thailand, which in December hiked for the first time since
2011.
The governors of Bank of Korea (BOK) and Bank Indonesia
(BI)both said on Thursday that they see more room for
"accommodative" policy, meaning that more rate cuts may be on
the way.
PRESSURE ON SOUTH KOREA
The BOK cut its base rate 25 basis points (bps) to 1.50%.
It also shaved this year's growth forecast to 2.2%, the lowest
in a decade, from 2.5%, as a brewing dispute with Japan piled
more pressure on the trade-dependent economy. "The policy board decided to lower the interest rate to
support the economic recovery as both the growth and inflation
trends were weaker than previously thought," Governor Lee
Ju-yeol said.
"Our economic assessment reflected Japan's imposition of
export restrictions as they will have considerable effects on
our economy," he added, referring to Japan's curbs on exports to
South Korea of key materials for chip and display production.
ING called Thursday's Korea cut a "mere reversal" of a 25
bps hike in November, but said it believes "this is just the
beginning of an easing cycle.
"The Korean economy may actually be in a recession right
now, we're simply waiting for the data to confirm it," ING Asia
chief economist Rob Carnell said in a note.
INDONESIA TO CUT MORE?
Indonesia's central bank cut its benchmark interest rate for
the first time in nearly two years, lowering the 7-day reverse
repo rate IDCBRR=ECI by 25 bps to 5.75%.
Indonesia has not been hit as hard by trade disputes as
South Korea has, but the U.S.-China trade war, slowing global
growth and falling commodity prices are denting its economic
performance.
Growth in Southeast Asia's biggest economy has stubbornly
held at around 5% in recent years and BI - which said efforts to
support domestic demand are needed to mitigate falling exports -
still sees 2019 growth below the midpoint of its 5.0%-5.4%
outlook.
"There is room for accommodative monetary policy, in line
with expectations of low inflation to further support economic
growth," Governor Perry Warjiyo told reporters.
After Indonesia's cut, the question becomes how much of an
easing cycle there might be to unwind some of BI's six rate
hikes in 2018, which totalled 175 bps.
"This is not a 'cautious cut' and there could be more
monetary easing down the road in 2019," Bahana Sekuritas
economists Satria Sambijantoro and Dwiwulan said in a note.
A Reuters poll before Thursday's showed many analysts
believe Indonesia's main rate next March could be 5.25%, which
would entail another 50 bps of cuts.
Capital Economics said in a note "the uncertain outlook for
the currency means that this is unlikely to be the beginning of
a prolonged easing cycle".
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TEXT of Bank Indonesia statement ID:nL4N24J2EV
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