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View all search resultsAnalyst expects BI rate to increase by 25 points
An economist with Gadjah Mada University, Tony Prasentiantono, expects Bank Indonesia (BI) to increase its benchmark interest rate (BI rate) by 25 basis points to 6
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A
n economist with Gadjah Mada University, Tony Prasentiantono, expects Bank Indonesia (BI) to increase its benchmark interest rate (BI rate) by 25 basis points to 6.25 percent to anticipate the effects of inflation in the banking sector.
'Our inflation expectation is already above 7 percent. With a deposit rate which currently stands at 5.75 percent, or equal to the Deposit Insurance Corporation (LPS) rate, it is unlikely that customers will be interested,' said Tony, after undergoing a fit-and-proper test as a member candidate for the BI Oversight Board (BSBI) in Jakarta, on Wednesday.
In such a situation, he said, customers would be likely to withdraw their funds from banks and buy stocks or US dollars.
'That's why the funds are mostly being invested in the IHSG or to buy dollars, so the dollar gets stronger [against the rupiah],' said Tony, as quoted by Antara news agency.
However, he said, even if the BI rate was increased to 6.25 percent, banks would initially have to increase their own interest rates to avoid a shortage of liquidity.
'There is a bank ' one of the ten biggest banks in the country -- whose third-party-funds (DPK) has declined by Rp 4 trillion [US$404 million],' said Tony, without providing details.
Such a situation, he said, indicated that consumers were no longer interested in the actual BI rate and were making 'their own BI rate'.
'That's what is happening now. So I think the BI rate should be increased,' said Tony. (ebf)
