* Key rate cut by 25 bps to 5.75%
* Indonesia joins South Korea in cutting ahead of Fed
* Bank Indonesia sees room for "accommodative monetary
policy"
By Tabita Diela and Maikel Jefriando
JAKARTA, July 18 (Reuters) - Indonesia's central bank cut
its benchmark interest rate for the first time in nearly two
years on Thursday in a bid to lift sluggish economic growth,
moving as expected ahead of the U.S. Federal Reserve.
Bank Indonesia (BI) trimmed the 7-day reverse repo rate
IDCBRR=ECI by 25 basis points (bps) to 5.75%, as predicted by
23 of 33 economists in a Reuters poll. "BI sees, in the future, 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 the central bank's two-day policy meeting.
Earlier on Thursday, South Korea's central bank unexpectedly
trimmed its rates for the first time in three years to combat
growing risks and an economic slowdown.
Governor Warjiyo said he hoped the rate cut could help
mitigate the impact of U.S.-China trade tensions. Growth in
Southeast Asia's biggest economy has stubbornly held at around
5% in recent years and BI still sees 2019 growth below the
midpoint of its 5.0%-5.4% outlook.
Warjiyo also pledged to work with other authorities to lift
growth. President Joko Widodo, who has been recently re-elected,
promised in a speech on Sunday outlining his vision for a second
term faster infrastructure development and more investment
opportunities to create jobs and growth.
After Indonesia's cut, the question becomes how much of an
easing cycle there might be to unwind some of 2018's six rate
hikes, which totalled 175 bps.
Warjiyo said accommodative policy might mean more liquidity
injection or further rate cuts.
NOT A 'CAUTIOUS' CUT
"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.
In contrast, 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".
In the wake of Thursday's cut, the rupiah IDR= , the
second-best performer in Asia this year after a recent rebound,
strengthened a touch while the stock market .JKSE and bond
prices held broadly steady.
Last year's rate increases were intended to defend the
rupiah amid capital outflows related to the Fed's tightening
cycle and the U.S.-China trade war.
The Fed is expected to cut U.S. rates at the end of July.
Since the Fed this year turned more dovish, amid slowing global
growth, some Asian central banks including Malaysia and the
Philippines have cut rates.
Effective July 1, Indonesia cut the reserve requirement
ratio for banks to free up liquidity and promote loan expansion.