BI bechmark rate down to 7.42%<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia continued to lower its benchmark interest rate on
\nWednesday following the report on low inflation in February.<\/p>\n
The interest rate on the one-month Bank Indonesia SBI
\npromissory note declined to a new historic low of 7.42 percent
\nduring the regular weekly auction on Wednesday, from 7.48 percent
\nthe previous week.<\/p>\n
The Central Statistics Agency announced on Monday that
\nannualized inflation last month weakened to a four-year low of
\n4.6 percent, while on a monthly basis the economy actually saw
\ndeflation as prices fell by 0.02 percent as a stronger rupiah and
\na good rice harvest pushed down food prices.<\/p>\n
Analysts had expected the falling prices would encourage the
\ncentral bank to further cut the SBI rate. Bank Indonesia has been
\naggressive in cutting the benchmark interest rate over the past
\ntwo years in a bid to push banks to lend more to the corporate
\nsector, and also to help ease the burden on the government in
\nservicing domestic debts, whose rates are linked to the SBI.<\/p>\n
But given the likelihood of higher inflationary pressure in
\nthe coming months as consumption increases during the elections,
\nthere will not be much room for the central bank to continue
\ncutting the SBI rate.<\/p>\n
One analyst said that with the current rate already at a
\nhistoric low, there was a likelihood the SBI rate would fluctuate
\nin the coming months, ending its year-long declining trend.<\/p>\n
Despite the lower SBI rate, however, banks remain reluctant to
\nboost lending to the corporate sector due to various reasons.
\nSome banks still considered investing in the sector as risky due
\nto the slow progress in the restructuring of corporate debts.
\nAnalysts also said that many companies are taking a more prudent
\napproach in financing their operations since the late 1990s
\ncrisis as they prefer to use internal funds and proceeds from
\nbonds issuance.<\/p>",
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"sponsor": "Okusi Associates",
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