Benchmark rates hoped to fall to 40% by year-end

Benchmark rates hoped to fall to 40% by year-end

JAKARTA (JP): Indonesia's benchmark one-month interest rate
will fall further this week and should reach the 40 percent level
by the end of the year, Bank Indonesia Governor Sjahril Sabirin
said on Tuesday.

Sjahril said the rates would continue to fall once the rupiah
strengthened again and inflation continued to ease.

"Once the situation stabilizes and the rupiah strengthens, we
can expect that interest rates will fall to the 40 percent level
by year-end," Sjahril told journalists on the sidelines of the
Special Session of the People's Consultative Assembly.

State Minister of National Development Planning Boediono added
the government would ease its monetary grip on account of the
rupiah's strengthening.

He said the government's upcoming letter of intent with the
International Monetary Fund would focus on relaxing monetary
policy.

International Monetary Fund deputy managing director Stanley
Fischer was quoted by Dow Jones Newswires in Canberra as saying:
"Interest rates will come down very fast in Indonesia now that
the rupiah has stabilized."

Benchmark interest rates on Bank Indonesia's one-month
promissory notes (SBI) fell to 53.66 percent at last week's
auction from the 70 percent level in early September.

The central bank holds its weekly SBI auction on Wednesdays.
It said that it would sell Rp 8 trillion (US$987 million) in one-
month SBIs and Rp 2 trillion in three-month SBIs today.

The rupiah has strengthened dramatically over recent weeks.
The currency was traded at 8,100 against the U.S. dollar on
Tuesday, compared to 12,000 in early September.

Sjahril has predicted that the rupiah should strengthen again
if the four-day Assembly passes peacefully.

Following the strengthening of the rupiah and easing of
inflation, the central bank has also cut maximum banking deposit
rates it guarantees to 57 percent for one-month deposits, 56
percent for three-month, 47 percent for six-month and 45 percent
for one-year rates.

Most commercial banks have also slashed their deposit rates to
below the rate ceiling set by the central bank.

State-owned Bank Negara Indonesia (BNI), for instance, offers
55 percent for one-month deposits of up to Rp 10 billion and 56
percent for more than Rp 10 billion. Last month, BNI's one-month
deposit rate stood at 61 percent.

BNI now offers 53 percent for three-month deposits, 41 percent
for six-month deposits and 38 percent for one-year deposits.

Bank Bali maintained its one-month deposit rates at 42 percent
per annum, three-month at 40 percent, six-month at 35 percent and
one-year at 30 percent.

Bank Internasional Indonesia has cut its one-month and three-
month deposit rates to 53 percent, six-month to 45 percent and
one-year to 43 percent.

Bank NISP has lowered its one-month deposit rate to 51
percent, three-month to 48 percent, six-month to 44 percent and
one-year to 40 percent.

Bank PSP offers 55 percent for one-month deposits, 54 percent
for three-month, 45 percent for six-month and 43 percent for one-
year.

Bank Bira has set its one-month deposit rate at 52 percent,
three-month at 51 percent, six-month at 42 percent and one-year
at 40 percent. (das/rid)