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Jakarta Post

LPS rate should be ‘derivative’ of Bank Indonesia repo rate

  • Haryo Kuncoro
    Haryo Kuncoro

    Research director at the Socio-Economic & Educational Business Institute (SEEBI)

PREMIUM
Jakarta   /   Wed, August 7, 2019   /  03:09 pm
LPS rate should be ‘derivative’ of Bank Indonesia repo rate Monetary easing – Bank Indonesia decides to cut its benchmark interest rate (BI Rate) by 25 basis points (bps) from 6.75 percent to 6.50 percent. (Antara/-)

The wait of about eight months has ended. July’s Bank Indonesia (BI) board of governors meeting decided to cut its benchmark interest rate (seven-day reverse repo rate) by 25 basis points to 5.75 percent. The BI repo rate is still open to the possibility of another cut during the current year. The cut in the central bank’s benchmark rate is a response to developments in the domestic and global economies, which are plagued by uncertainty. Within the domestic scope, Indonesia’s annual economic growth remains stagnant at around 5 percent. In the international scope, the United States-China trade war has raised fears of weakening trade flows between the two major countries. As a result, the economic growth of all trading partners will be depressed, which impacts on Indonesia’s economic performance. The benchmark rate cut is relevant in mitigating the above ri...

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.