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BI holds benchmark rate, urges banks to lower lending rate
BI Governor Perry Warjiyo said the central bank was keeping the seven-day reverse repo rate at 3.75 percent, the lowest since the rate was introduced in 2016.
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Bank Indonesia (BI) Governor Perry Warjiyo at the bank’s office building in Jakarta. (Courtesy of Bank Indonesia/-)
B
ank Indonesia (BI) announced on Thursday that it would maintain its benchmark interest rate, the lowest in its history, and urged banks to lower their interest rates to boost the economy.
BI Governor Perry Warjiyo said the central bank was keeping the seven-day reverse repo rate at 3.75 percent, the lowest since the rate was introduced in 2016. The central bank also maintained the deposit facility and lending facility rates at 3 and 4.5 percent respectively, following a two-day policy meeting.
“This decision is consistent with our expectation of a low inflation rate, as well as external stability and a stable exchange rate,” he said during a virtual press briefing, adding that the move also aimed to support the national economic recovery program.
Indonesia’s inflation rate picked up in November to 1.59 percent year-on-year (yoy), the highest level since June as the rainy season hindered the distribution of goods and services, according to Statistics Indonesia (BPS) on Dec. 1. The figure was higher than the 1.44 percent recorded in October but still below BI’s target range of 2 to 4 percent.
Despite the low interest rate, Perry said the central bank was of the view that banks’ efforts to lower their interest rates were “going at a snail’s pace”. Banks’ working capital loan interest rate stood at 9.32 percent in November of this year, down slightly from 9.38 percent in October, according to BI data.
“We would encourage banks to lower their loan interest rate through supervision and public communication on their interest rate transparency,” said Perry.
The central bank has cut its benchmark interest rate five times this year to support the pandemic-battered economy. It has also taken quantitative easing measures to support the economy, including buying government bonds, cutting the reserve requirement ratio and expanding the money supply.
