The limited room for a policy rate cut does not dampen the spirit of Bank Indonesia (BI) to loosen its monetary policy.
The central bank’s board of governors’ meeting in the middle of January opened the 2018 sheet by relaxing some macro prudential policies.
First, BI refined the primary reserve requirement (RR). The RR in rupiah for commercial banks that had originally been set at 5 percent of daily-fixed third-party funds with 1.5 percent average within the two weeks as maintenance period was reduced to 4.5 percent and 2 percent, respectively.
The difference of 0.5 percent at least adds liquidity of Rp 20 trillion (US$1.5 billion) to the banking system. The increase in liquidity is expected to improve the capacity of loan disbursement, targeted to grow 12 percent within this year. Therefore, the maneuver to realize the target of economic growth of 5.4 percent be...