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Indonesia: 25bp Rate Cut To 5.5% (Consensus 5.5%) in May-25

• Bank Indonesia cut the BI-Rate by 25 basis points to 5.50%, matching consensus forecasts and resuming monetary easing after a three-meeting pause, citing controlled inflation and rupiah stability.
• The decision was driven by subdued inflation, a stabilised currency, and weaker-than-expected GDP growth, with BI revising its 2025 growth forecast slightly downward and emphasising the need to support domestic demand.
• Future interest rate policy will remain data-dependent, with further easing possible if inflation and currency stability persist. Still, BI is expected to proceed cautiously given ongoing global uncertainties and the need to safeguard external resilience.

Trump Doctrine: All Talk And No Trousers

• Despite the frenetic activity in the international arena that we have seen from the US in recent weeks, whether in trade or diplomacy, showmanship continues to trump substance, thereby posing real risks for policymakers and investors alike.

By Alastair Newton

Australia: 25bp Rate Cut To 3.85% (Consensus 3.85%) in May-25

• The RBA cut the cash rate by 25bps to 3.85%, in line with expectations, as trimmed mean inflation fell below 3% and is likely to remain near the midpoint of the 2–3% target range.
• Despite easing financial conditions and recovering household incomes, consumption momentum remains weak, while high unit labour costs, driven by subdued productivity, present lingering inflation risks.
• Global trade uncertainty and geopolitical tensions weigh heavily on the outlook, reinforcing the RBA’s cautious approach and commitment to respond decisively if downside risks to growth or inflation emerge.

EA Inflation Steady In Spring 2025

• Signals about underlying inflationary pressures remain the most interesting aspect of another unrevised euro area print of 2.2% in April, with the core at 2.75%.
• The median impulse was also steady at about a 2% annualised pace as national moves offset. Other statistical measures and wage growth remain stuck above the target.
• We expect the ECB to cut again in June, alongside forecasts that will be lowered due to Euro appreciation. The tight labour market should discourage cutting to a loose setting.

By Philip Rush