BI benchmark rate down again

BI benchmark rate down again

The Jakarta Post, Jakarta

Bank Indonesia said the interest rate on its one-month SBI
promissory notes declined again during the weekly Wednesday
auction, which is surprising given the expected strong
inflationary pressure this month as a result of the utility price
hikes.

The benchmark rate slipped to 12.89 percent from 12.93 percent
previously.

The central bank said it had accepted Rp 20 trillion in bids
for the one-month SBI notes, or 66 percent of the total bids
received.

Bank Indonesia also said it had auctioned Rp 16 trillion of
three-month SBI notes, or 80 percent of the total incoming bids.
The weighted average rate of the three-month SBI notes fell to
12.94 percent from 13.11 percent.

The central bank has been aiming to lower the benchmark rate
since the beginning of 2002 when it stood at more than 17
percent. The move was crucial to help push the banking sector to
provide cheaper loans for businesses, and to reduce the state
budget burden in covering the interest rates of government bonds.

But many said earlier that it would be unlikely for the
central bank to let the benchmark rate drop again this week to
help curb the strong inflationary pressure resulting from the
recent increases in fuel, electricity and telephone charges.

The rate cut may indicate the central bank is not overly
concerned with the impact of the recent price hikes on inflation
for the whole year. Bank Indonesia instead still wants to guide
rates lower to help spur economic growth and reduce the weighty
costs of the bailout program for the financial sector.