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BI rate cut to 7.25% with minister at meeting
A woman walks past Bank Indonesia (BI)
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A woman walks past Bank Indonesia (BI). The central bank has slashed the benchmark interest rate by 25 basis points to 7.25 percent, After maintaining its rate for 11 consecutive months. (Kontan) (BI). The central bank has slashed the benchmark interest rate by 25 basis points to 7.25 percent, After maintaining its rate for 11 consecutive months. (Kontan)
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span class="caption">A woman walks past Bank Indonesia (BI). The central bank has slashed the benchmark interest rate by 25 basis points to 7.25 percent, After maintaining its rate for 11 consecutive months. (Kontan)
After maintaining its rate for 11 consecutive months, Bank Indonesia (BI) has slashed the benchmark interest rate by 25 basis points to 7.25 percent.
The first rate cut since February 2015 was decided on after a BI board of governors meeting that was attended by the Coordinating Economic Minister Darmin Nasution. It is the first time the BI has conducted such meeting with a government representative in attendance.
'The reduction of the BI Rate is expected to support previous macroprudential policy-easing measures and the lowering of primary reserves in rupiah. Further easing will take place after rigorous assessments of the domestic and global economy,' said BI spokesperson Tirta Segara on Thursday in Jakarta.
BI, he further said, would also strengthen its coordination with the government to control inflation, catalyze growth and accelerate structural reforms, thus supporting sustainable economic growth.
At the same meeting, BI held the deposit facility rate and lending facility rate at 5.25 percent and 7.75 percent, respectively.
Senior economist at Kenta Institute Eric Sugandi said that it was the right time for a rate cut, as inflation and current account deficit (CAD) were in a controllable state and the rupiah's movement was stable.
'The BI rate cut will be followed by a deposit-rate cut [at the bank] and then a loan-rate cut. But the impact on loan growth will be small because the cut will be limited, only 25 bps. A bigger impact would occur if the cut was bigger,' he said.
Tirta further said that BI's policy mix would remain focused on maintaining macroeconomic and financial system stability in 2016, while stimulating economic momentum, and that gradual monetary easing would remain consistent with efforts to maintain macroeconomic and financial stability. (ags)
