Further interest rate cuts still possible this year: BI<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia Governor Sjahril Sabirin said there was still
\nmore room for the central bank to continue to lower its benchmark
\ninterest rate this year.<\/p>\n
He said that the lower interest rate environment could be made
\npossible amid expectations of slower inflation.<\/p>\n
\"Given the good prospects of the rupiah and inflation, we
\nstill see the opportunity to bring the (benchmark) interest rate
\ndown even lower,\" Sjahril told legislators during a hearing with
\nthe House of Representatives Commission IX on financial affairs
\non Wednesday.<\/p>\n
The interest rate on Bank Indonesia one-month SBI promissory
\nnotes slightly declined to 12.65 percent at Wednesday's weekly
\nauction, compared to 12.77 percent the week before.<\/p>\n
The central bank has been guiding its benchmark rate lower for
\nthe past year. In early 2002, the interest rate hovered at more
\nthan 17 percent.<\/p>\n
But Sjahril was quick to add that the rate of decline in the
\nbenchmark rate would not be as big as last year's.<\/p>\n
The lower benchmark rate would not only help reduce the burden
\non the state budget in covering the interest on the massive
\ngovernment bonds issued to help bail out banks in the late 1990s,
\nbut would also help make bank lending more affordable to the
\nbusiness sector.<\/p>\n
Sjahril said that the central bank was expecting a lower
\ninflation rate this year particularly as the rupiah was expected
\nto become stronger.<\/p>\n
After deservedly being labeled the region's best currency
\nperformer last year, the rupiah's strong hold on the U.S. dollar
\nwas expected to continue this year, Sjahril predicted, although
\nit would not appreciate as much as it did in 2002.<\/p>\n
\"The local unit is expected to strengthen as dollar supply
\nwould exceed demand this year. It would hover at between Rp 8,800
\nand Rp 9,200 on average,\" he said.<\/p>\n
Last year saw the rupiah appreciate by more than 10 percent,
\naveraging at Rp 9,316 as compared to 2001, which averaged at Rp
\n10,225 against the dollar.<\/p>\n
The supply would mostly come from export revenue; inflow of
\nforeign capital -- in the form of foreign loans or investments;
\nthe sale of assets under the Indonesian Bank Restructuring Agency
\n(IBRA) privatization and divestment program.<\/p>\n
On the other hand, the restructuring of foreign debts by the
\nprivate sector, both via the Jakarta Initiative Task Force (JITF)
\nand independently, would help reduce dollar demand from the
\ncorporate sector.<\/p>\n
Bank Indonesia was convinced that the above factors would be
\nable to offset the pressure on the rupiah, arising from the
\nexpected rising political tension ahead of the 2004 election
\nstarting in the second half of the year.<\/p>\n
Since the economy has a high dependence on imported material,
\na strong rupiah would be influential in keeping the prices of
\ngoods in the domestic market low, giving only little inflationary
\npressure.<\/p>\n
BI predicted that the main source of inflation would center on
\nthe impact from the government's policy on utility prices.<\/p>\n
The impact of the policy on the prices would contribute 3.0
\npercent to overall inflation this year, which is lower than last
\nyear's, where the prices made up around 3.3 percent of the full
\nyear's inflation.<\/p>\n
\"Underpinning such arguments, Bank Indonesia has set inflation
\nfor 2003 at 9 percent, with a deviation of -1 percent to 1
\npercent,\" Sjahril said.<\/p>\n
The target is the same as what had been agreed to in the 2003
\nstate budget.<\/p>\n
Elsewhere, Bank Indonesia reported that new bank lending in
\n2002 reached Rp 72.17 trillion, or higher than Rp 56.8 trillion
\nin 2001.<\/p>\n
The central bank said that total outstanding bank loans were
\naround Rp 363.9 trillion.<\/p>\n
Sjahril said that some 41 percent of the new bank lending was
\nin the form of micro credit with individual loans amounting to
\nless than Rp 5 billion. This was mostly given to small and
\nmedium-sized companies.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/further-interest-rate-cuts-still-possible-this-year-bi-1447893297",
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