Fri, 06 Oct 2006
BI rate cut seen as positive sentiment for property business

Jakarta (ANTARA News) - Developers consider Bank Indonesia`s decision to lower its rate by 50 base points to 10.75 percent to be a positive sentiment for developemnt of the national property business, an industry spokesman said.

"The Bank Indonesia`s decision to reduce its rate by 50 base points to 10.75 percent is likely to boost Indonesian property business development," Johanes Mardjuki, director of publicly-listed Summarecon Agung company, said here Friday.

Actually, developers had hoped the central bank would cut its rate to 10.50 percent but its decision to reduce the rate to 10.75 percent was still a good thing, he said.

Johanes expressed confidence the BI rate would further drop to 10 percent late this year as Indonesia`s economic conditions were beginning to improve and the inflation rate was continuing to decrease.

Unfortunately, he said, people`s purchasing power had continued to decline after the government increased fuel oil prices in October last year.

Therefore, he suggested that the real sector be given tax facilities and that the banking sector abandon its hesitance to channel funds to the real sector so that people`s interest in buying real sector products could be revived.

Bank Indonesia Governor Burhanuddin Abdullah had said the central bank`s decision to reduce its rate - made at a BI governors` council meeting here on Thursday - was based on a careful evaluation of the country`s current economic conditions.

Johanes said the BI rate reduction would have a significant impact on the stock market, bonds and the rupiah`s exchange rate against the US dollar.

He also said an increase in property share prices at the Jakarta Stock Exchange (JSX) could not be separated from a significant rebound in the composite index at the JSX.

The strengthening of the rupiah and improving investors sentiment at global and regional bourses highlighted the stock market at the JSX, he said.

Bank Indonesia reduced its rate for the first time this year by 25 base points from 12.75 percent to 12.50 percent on May 9. The decision was made for the first time since December 6.

The central bank cut its rate again from 12.50 percent from 12.25 percent last July.

The BI rate was reduced by 50 base points from 12.25 percent to 11.75 percent last August and by 50 points to 11.25 percent last September. (*)



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