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View all search resultsFor four consecutive months, Bank Indonesia (BI) has cut its benchmark interest rate, the BI seven-day reverse repo rate, by 100 basis points (bps) to 5 percent. BI’s aggressiveness in easing its money policy is not without reason. However, cutting interest rates when banks are experiencing liquidity problems seems to be unusual. The big question here is whether the cut in the policy rate is effective in improving the liquidity of banks.
The cut in the central bank’s benchmark rate is a response to developments in the domestic and global economies, which are plagued by uncertainty. Within the domestic scope, Indonesia’s annual economic growth remains stagnant at around 5 percent.
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