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Lending rates in new reserve regime
The failure to achieve single-digit lending rates by the end of 2016 has not apparently dampened the enthusiasm of Bank Indonesia (BI) to achieve the target this year.
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This June 19, 2015, file photo shows the Marriner S. Eccles Federal Reserve Board Building in Washington. (Associated Press/Andrew Harnik)
T
he failure to achieve single-digit lending rates by the end of 2016 has not apparently dampened the enthusiasm of Bank Indonesia (BI) to achieve the target this year.
At the end of March 2017, the average lending rate was 11.90 percent, a slight decline from 11.97 percent in the previous month.
The decline in deposit rates is still much greater than that of lending rates, implying that the room to further lower credit rates is still open.
However, the ability to reduce lending rates through cuts in BI’s policy rate is increasingly limited. In fact, the benchmark interest rate, the BI seven-day reverse repo rate, has been stagnant at 4.75 percent for the last six months.
