BI further cuts SBI rate<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
In a sign of further confidence in the economy, the central bank
\ncut its benchmark interest rate to 9.10 percent on Wednesday from
\n9.17 percent previously.<\/p>\n
Bank Indonesia has cut the interest rate on one-month SBI
\npromissory notes by more than 4 percentage points since the
\nbeginning of this year amid a benign inflation environment and
\nstronger exchange rate of the rupiah against the U.S. dollar.<\/p>\n
But the central bank's latest rate cut at the weekly auction
\nof the SBI notes was made at a time of rising concern over the
\nstrength of the rupiah, which last week fell to a three-month low
\nand forced Bank Indonesia to intervene by selling its dollar
\nreserves. Bank Indonesia officials have remained optimistic on
\nthe prospects of the rupiah.<\/p>\n
After appreciating more than 8 percent since early this year,
\nthe rupiah faltered last week mostly on the dollar's newly found
\nstrength, triggered by rising confidence in the U.S. economy. The
\nsentiment forced the local unit to weaken to as low as 8,700 mid
\nweek.<\/p>\n
On Wednesday, the local currency closed at Rp 8,510 per
\ndollar, up from Tuesday's closing of 8,610 per dollar, a move
\nthat seems to justify the confidence shown by Bank Indonesia in
\nsimultaneously slashing its one-month interest rate.<\/p>\n
Analysts have regarded the low Bank Indonesia interest rate as
\nbeneficial to the overall economy.<\/p>\n
On the government side, the lower rate means lower allocation
\nin servicing the payments for its huge public debts, as most of
\nits interest rates are tied to the BI's rate movement. The state
\nbudget should save up to Rp 2 trillion from a 1 percent decline
\nof the BI's rate.<\/p>\n
The private sector should also benefit, as banks will be
\nforced to cut their interest rates for commercial lending as
\nwell, making loans more affordable for the private sector.<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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