Bank Indonesia cuts again interest rate ceiling
Bank Indonesia cuts again interest rate ceiling
JAKARTA (JP): Bank Indonesia (BI) has again lowered the
ceiling for guaranteed interest rates in the wake of a stronger
rupiah and softening inflationary pressure.
The central bank announced on Friday that the ceiling for the
one-month deposit interest rate for this week was lowered to 63
percent from 64 percent last week, in the wake of a stronger
rupiah.
Bank time deposits offering interest rates exceeding the
central bank's ceiling rates will not be guaranteed by the
government in case the bank collapses.
The central bank also cut the ceiling rates for the three-
month, six-month, and 12-month time deposits by a percentage
point to 60 percent, 49 percent, and 47 percent, respectively,
while the ceiling rate for the 24-month deposit remained at 30
percent.
The central bank announces the ceiling rates every week late
on Friday. The cut was the third this month.
The ceiling rates for foreign exchange time deposits were,
however, left unchanged.
The maximum overnight rate for the rupiah was lowered to 57
percent from 58 percent, while the maximum overnight rate for
U.S. dollar deposits remained at 14 percent.
The country's monetary authority has started to ease its tight
policy over the past couple of weeks. The benchmark interest
rates for the Bank Indonesia one-month promissory notes (SBI)
dropped last week to about 59 percent from more than 70 percent
last month.
Domestic commercial banks have also lowered their time deposit
rates by an average of eight percentage points to below 60
percent.
Bank Indonesia Governor Sjahril Sabirin said last week that
the stronger rupiah and a lower inflation rate had enabled the
central bank to lower the rates, and promised that if the rupiah
and inflation continued to improve the rates could be lowered
again.
The rupiah has been strengthening in the past couple of weeks,
closing to Rp 8,200 to the U.S. dollar on Friday, compared to
around Rp 12,000 early last month.
Monthly inflation dropped to 3.75 percent in September,
compared to more than 6 percent in August.
Sjahril expected inflation to drop to zero percent this month
if the political situation remained stable.
He was also optimistic that the rupiah would further improve
as he said confidence in the country had returned and the
government's economic reform programs were gaining credibility.
A quarter percentage-point cut in the U.S. Federal Reserve
interest rate on Thursday would provide an added boost to the
already bullish mood toward the local currency, he added. (rei)