Indonesia’s surprise rate cut
Bank Indonesia’s rate cut this week stunned markets for all the wrong reasons – investors fear the central bank is bowing to pressure from President Prabowo Subianto to juice the economy, compromising its independence and risking a rupiah selloff.
Global investors have been increasingly nervous about Indonesian assets following protests in many cities since late August, while the abrupt sacking of respected finance minister Sri Mulyani Indrawati last week stoked fiscal worries.
The interest rate cut on Wednesday, a move not expected by any of the 31 economists surveyed by Reuters, is now raising concerns about the central bank’s independence and bringing Prabowo’s growing influence into focus as the president pushes ahead with an ambitious goal of lifting growth to 8 percent from the current 5 percent pace.
Bank Indonesia’s (BI) shock decision comes as investors worldwide grapple with the rising threat to the independence of central banks, an issue that has been brought to the fore, opens new tab by the repeated attacks on the Federal Reserve and its policymakers by President Donald Trump and his administration.
Southeast Asia’s largest economy has been struggling to push ahead with Prabowo’s populist and costly spending plans since he came to power last year.
The worry for investors is that the hard-won fiscal credibility risks being sacrificed by the president’s push to speed up growth, leading to a worsening in the current account position and higher inflation, with a politicized central bank unable to keep a lid on it.
“Indonesia is leaning hard on growth,” said Howe Chung Wan, head of Asian fixed income at Principal Asset Management. “Policymakers know a sluggish economy and weak jobs market could stoke discontent, so the bias is toward running the economy hot.”
“The question for investors isn’t whether Indonesia wants growth, but whether it can balance that against currency stability. The rupiah remains the main pressure point, since the country still relies heavily on imports and foreign capital.”
China’s economy remains trapped
The Chinese leadership has gone to great lengths to project an image of strength and confidence—just witness this month’s gathering of China’s friends at the military parade marking the end of World War II. Chinese President Xi Jinping will likely try to maintain that image when he speaks with US President Donald Trump in a phone call scheduled for the end of this week.
But the economic reality is very different than the face China presents to the world, and the latest statistics describe a country mired in a slowdown. The numbers show that efforts to juice the economy late last year have failed to stimulate sustained recovery.
Consumption growth as measured by retail sales fell last month to the slowest pace this year, up only 3.4 percent from August 2024, and compared with a 6.8 percent increase in June of this year. This is despite efforts the government has made to boost consumer spending, including by providing subsidies for trade-in purchases of cars and appliances. As funding to the provinces for the subsidies has been exhausted, retail sales have lost momentum.
Factory and mining output also decelerated last month, posting the smallest gain since August 2024. Fixed-asset investment in the first eight months of the year dropped steeply to a gain of less than 1 percent. Some of the slowdown in production and investment may reflect Beijing’s efforts to strong-arm companies into reducing the price cuts and overproduction that are exacerbating the economy’s problems. Either way, Chinese demand is nowhere near enough in the best of times to meet the country’s high levels of factory production, and these goods are being exported.
Central Asia deepens trade links with India
Trade between the countries of Central Asia and India is growing, edging closer to the $2 billion mark and signaling a new phase in cooperation across the Eurasian continent. According to data from the Eurasian Development Bank (EDB), this surge reflects the expanding economic footprint of both regions.
Nikolay Podguzov, Chairman of the EDB, emphasized that Central Asia and India are not only continental neighbors but also markets with significant untapped potential. Of the bank’s seven member states, four — Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan — form the heart of Central Asia. Their growing engagement with New Delhi is now setting the tone for broader regional cooperation.
The economic fundamentals supporting this trend are healthy. Central Asia has maintained steady growth of around 4.5 percent annually, while India’s economy continues to expand even faster, at roughly 6 percent per year. But despite this positive backdrop, there are still logistical hurdles. Trade routes between India and Central Asia must pass through intermediary countries such as Iran, Russia, or Azerbaijan — each adding layers of bureaucracy, customs costs, and delays.
Bank of Japan keeps rates unchanged
The Bank of Japan kept its benchmark interest rate at 0.5 percent on Friday, ending a two-day meeting in Tokyo without any change in monetary policy.
The vote split was 7 to 2, and literally no one was surprised—all 50 economists polled by Bloomberg expected the hold. But the real development wasn’t the rate. The real story? For the first time ever, the central bank said it’s going to start dumping its exchange-traded funds.
The ETF stash, built up during Japan’s wild pandemic-era monetary easing campaign, is valued at around ¥37 trillion on the books. Back in 2020, the BoJ became the largest single owner of Japanese stocks, but that buying spree ended last year.
Meanwhile, Japan’s core inflation dropped to 2.7 percent in August, the lowest reading since November 2024. This was the third straight monthly decline, so its not the kind of trend that gets the BoJ in a hurry to hike anything.
Malaysia – Palestine seal mou
MALAYSIA and the State of Palestine have signed a landmark Memorandum of Understanding (MoU) aimed at strengthening bilateral trade and deepening economic cooperation, as part of efforts to support Palestine’s socio-economic recovery.
The MoU, formalised on Thursday, outlines strategic collaboration in areas including trade, investment, the halal industry, energy, tourism, and the digital economy. It also seeks to foster private sector partnerships and build capacity through training and knowledge-sharing initiatives.
The agreement was exchanged between Datuk Hairil Yahri Yaacob, Secretary General of Malaysia’s Ministry of Investment, Trade and Industry (MITI), and H.E. Walid Abu Ali, the Ambassador of Palestine to Malaysia, in a ceremony witnessed by Prime Minister Datuk Seri Anwar Ibrahim.
“This momentous occasion reaffirms Malaysia’s unwavering commitment to supporting Palestine’s economic resilience and recovery,” MITI said in a statement following the signing.
The MoU includes initiatives to develop industrial zones, strengthen small and medium enterprises (SMEs), and promote sustainable growth across sectors with strong potential.
India extends Maldives’ repayment deadline for $50 million t-bill
In a gesture borne out of friendliness, India has decided to roll over, for another year, government bonds worth USD 50 million that Maldives had borrowed from the State Bank of India (SBI) as an “emergency financial assistance”.
The Indian High Commission said on Thursday that the deadline for the repayment was September 18, 2025, but that the country’s largest public sector lender had “subscribed, for one more year, a USD 50 million Government Treasury Bill issued by the Ministry of Finance of Maldives”.
“This has been done under a unique Government-to-Government arrangement, as an emergency financial assistance to Maldives,” the statement, posted on the High Commission’s X account,