BI keeps rate stable at 7.40%

BI keeps rate stable at 7.40%

The Jakarta Post, Jakarta

The benchmark interest rate on one-month SBI promissory notes
increased slightly to 7.40 percent during the biweekly auction on
Wednesday from 7.39 percent in the previous two weeks.

The relatively stable rate came after the Central Statistics
Agency (BPS) announced a lower inflation in September, which saw
annualized inflation during the month at 6.27 percent, easing
from year-on-year inflation of 6.7 percent in August.

Bank Indonesia has been facing rising calls in the past months
to increase its benchmark interest rate to help curb rising
inflationary pressure and maintain stability in the rupiah.

But central bank officials have insisted that it had no
intention of raising interest rates despite rising rates in the
U.S., arguing that domestic interest rates were still attractive
compared to rates in other countries.

Strong inflationary pressure was particularly evident in July
when inflation stood at more than 7 percent, above the
government's full-year target of 6.5 percent. The rupiah at the
time was also under strong pressure due to combination political
uncertainty ahead of the presidential election in September and
rising U.S. rates.

The central bank also argued on Wednesday that the current
rate is conducive to increase business activities and help push
economic growth.

For the past couple of years, Bank Indonesia has been trying
hard to lower domestic interest rate in a bid to make bank loans
cheaper for the corporate sector, and also ease the government's
burden in easing its huge domestic debts.

Meanwhile, the central bank also slightly lowered the interest
rate on three-month SBI notes to 7.30 percent from 7.31 percent.
The interest rate on the government domestic debt is largely
linked to the three-month SBI rate.