Central bank to relax regulation to boost liquidity

The central bank will relax a regulation on the minimum reserve each bank must hold in comparison to deposits to boost liquidity amid increasing pressure from the U.S.-led liquidity squeeze.

Speaking to reporters at a gathering in the Finance Ministry's Office, Bank Indonesia senior deputy governor Miranda Gultom said the cash reserve ratio would be lowered to 7.5 percent from 9.08 percent.

She said the regulation would take effect in a month.

On Tuesday, the Indonesian Chamber of Commerce and Industry proposed recommendations to the government and the central bank, which among others advised a relaxation on the minimum reserve regulation.

The central bank raised its benchmark rate by 25 basis points to 9.5 percent Tuesday, on the back of rising inflation, with year-on-year inflation soaring to 12.4 percent in September. The move has been heavily criticized by business players as the cost of borrowings will rise. (and)