Inflation at three-year low, SBI to drop<\/p>\n
Evi Mariani, The Jakarta Post, Jakarta<\/p>\n
Inflation in June increased by only 6.62 percent compared to the
\nlevel in the same month last year, which the Central Statistics
\nAgency (BPS) said was the lowest year-on-year rate in three
\nyears.<\/p>\n
The low inflation provides greater room for Bank Indonesia to
\nfurther cut its benchmark interest rate, analysts said.<\/p>\n
BPS said on Tuesday that when compared to the previous month,
\ninflation -- as measured by the consumer price index -- in June
\nrose slightly by 0.09 percent due to higher prices of goods and
\nservices such as food, beverages, cigarettes, clothing and rising
\ncosts of housing, health, transportation and telecommunications.<\/p>\n
Citibank economist Anton Gunawan told The Jakarta Post that
\nthe June inflation rate was \"surprisingly good\", as Citibank had
\npreviously forecast the rate would reach 6.8 percent.<\/p>\n
Some economists have said that if inflation could be
\nmaintained at below 7 percent, the benchmark rate on one-month
\nBank Indonesia SBI promissory notes could go down to a new six-
\nyear low of around 8 percent.<\/p>\n
\"The rate would allow Bank Indonesia to further cut the SBI
\nrate to as low as 8 percent, and even lower,\" said Anton.<\/p>\n
The SBI rate has been steadily declining during the past year
\nfrom over 17 percent earlier last year to around 9.53 percent
\nnow. This has been possible due to a stronger rupiah and a
\nrelatively low inflation.<\/p>\n
Bank Indonesia deputy governor Aslim Tadjudin said on Tuesday
\nhe expected the SBI rate to go down to below 9 percent this week
\namid the healthy inflation environment.<\/p>\n
The lower SBI rate would help ease the government's burden in
\nservicing its huge domestic debts, as well as enabling banks to
\nlower their lending rates and hopefully spur new loans from the
\ncorporate sector. Increasing loans to the corporate sector would
\nin turn help push the economy upward.<\/p>\n
As macroeconomic indicators such as the rupiah, inflation and
\nSBI rate appear to be in a much better condition than those
\nassumed in the 2003 state budget, there is hope that this year's
\neconomic growth could be higher than the 4 percent government
\nprojection.<\/p>\n
\"Theoretically, with inflation and SBI rates doing so well,
\nthe GDP (gross domestic product) growth will also go higher than
\nexpected,\" said Anton.<\/p>\n
But he was quick to add that such a scenario may not
\nmaterialize as bank lending rates remained high at around 17-18
\npercent due to various other problems that have prevented banks
\nfrom dropping their rates. This, in turn, may limit lending to
\nthe corporate sector.<\/p>\n
\"The link between the economic data and the real sector is the
\nbanking industry. Without some improvement in the industry, the
\neconomy will remain relatively unhealthy,\" he said.<\/p>\n
\"So, I'm not revising Citibank's GDP growth forecast of 3.9
\npercent this year. I think that it will be good enough for the
\ncountry if it can reach the 3.9 percent forecast,\" he said.<\/p>",
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