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BI’s new benchmark interest rate to take effect Saturday
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Bank Indonesia Governor Agus Martowardojo gives a speech at the Executives' Meeting of Asia Pacific Central Banks (EMEAP) in Bali on Aug. 1. (Courtesy of Bank Indonesia/-)
B
ank Indonesia’s (BI) new benchmark interest rate, the seven-day reverse repo rate, will become effective in the financial market on Saturday at 12 a.m.
BI governor Agus Martowodojo said the central bank would announce the implementation of the new interest rate on Friday. The new reference rate is expected to make Indonesian monetary policy transmission more effective in trimming lending and deposit rates.
"After being announced tomorrow, the seven-day reverse repo rate will be applied a day after. It will surely affect transactions the day after implementation," Agus said in Jakarta on Thursday.
Under the new reference, the financial market must leave behind the BI rate, which is currently at 6.5 percent, and turn to the reverse repo rate at 5.25 percent.
An exclusive transition period in the financial market, Agus added, was unnecessary as the central bank announced the plan four months ago, on April 15. The central bank has applied both benchmarks since then, and will do so until Friday.
"[When] this new reference is later enacted, we believe monetary policies will be transmitted to the market more quickly. In addition, financial deepening will also be realized and there will be more efficient mechanisms," he explained. (ags)
