BI lowers discount rate

BI lowers discount rate

JAKARTA (JP): The central bank, Bank Indonesia, has lowered
its discount rate for short-term money market securities (SBPU)
yesterday by 50 basis points.

The central bank did not announce the cut but money dealers
said the key rate for one-week securities was cut to 14.75
percent, for two-week securities to 15 percent and for one-month
securities 15.50 percent.

SBPUs are short term securities purchased by the central bank
to inject liquidity into the banking system.

Money market analysts said the interest rate cut was an
indication that liquidity in the banking system was too high.

In the last two months, commercial banks have lowered three-
month deposit interest rates by 50 basis points to one percentage
point to between 14 percent and 15 percent a year. The rate cut
followed the central bank's lowering the discount rate of the
promissory note (SBI) -- the central bank's instrument to reduce
liquidity in the banking system

A central bank senior official said the rate cut was normal
practice in controlling liquidity in the banking system and that
it would not affect the central bank's policy in managing the
rupiah's value against foreign currencies.

The rupiah is pegged to a basket of major foreign currencies.
But local analysts said the value of the rupiah against the U.S.
dollar had been too high, making Indonesian exports less
competitive.

Local analysts have repeatedly called on the central bank to
depreciate the rupiah against the U.S. dollar more quickly to
support export activities.

The government's depreciation target of the rupiah against the
U.S. dollar is between 4 percent and 5 percent a year. (hen)