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BI cuts interest rate to 6.5%, introduces policy mix to boost loans
Bank Indonesia (BI) has decided to introduce monetary easing and macro-prudential policies to boost lending in a bid to spur economic growth.
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Monetary easing – Bank Indonesia cut on Thursday the benchmark interest rate by 25 basis points (bps) from 6.75 percent to 6.50 percent. (Antara/-)
B
ank Indonesia (BI) has decided to introduce monetary easing and macro-prudential policies to boost lending in a bid to spur economic growth.
The central bank’s board of governors decided on Thursday to cut the benchmark interest rate by 25 basis points (bps) from 6.75 percent to 6.50 percent. The bank also cut its deposit and lending rates to 4.5 percent and 7 percent, respectively.
BI also announced that the bank’s 7-Day (Reverse) Repo rate would remain at 5.25 percent. Consequently, BI’s term structure of monetary operations remains as follows: 5.25 percent for a seven-day tenor, 5.45 percent for a two-week tenor, 5.70 percent for a one-month tenor, 6.10 percent for a three-month tenor, 6.30 percent for a six-month tenor, 6.40 percent for a nine-month tenor and 6.50 percent for a 12-month tenor.
"As its macro prudential policy, BI has also conducted policy easing related to its precautionary principles," BI's executive director of communications Tirta Segara said at a press conference on Thursday.
The macro-prudential policies comprise loan to value ratio (LTV) and financing to value ratio (FTV) on property loan provision easing for houses, apartments and shop-houses.
BI also raised the lower limit of the primary reserve requirement's loan financing ratio (GWM-LFR) from 78 percent to 80 percent, with the upper limit unchanged at 92 percent.
"This will be effectively implemented in August," Tirta said.
He further said the policy mix was in line with the board of governors' assessment that macroeconomic conditions remained stable, as reflected in the country’s low inflation rate, under control current account deficit and relatively stable exchange rate.
"The policy mix is expected to further strengthen the government’s efforts to boost domestic demand to continue to drive the momentum of economic growth while maintaining macroeconomic stability, amid ongoing weak global economic conditions," Tirta said.
He further said BI believed the monetary easing and macro-prudential policy would strengthen the policy institutionalized by the government to boost sustainable economic growth through a series of stimulus packages and to speed up structural reforms. (ebf)
