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.