BI slashes rate to historic low

BI slashes rate to historic low

The Jakarta Post, Jakarta

Bank Indonesia (BI) cut its benchmark one-month interest rate
on Wednesday to a historic 8.51 percent, from its already low
rate of 8.53 percent the week before.

Albeit slight, the decline should confirm the central bank's
continued commitment to making commercial lending rates more
affordable, thus helping spur economic activities.

The down trend of Bank Indonesia's rate is to be followed by
banks' lowering commercial lending interest rates, a move which
is expected to help boost investment in the private sector, many
of which have been idle since the economic crisis in 1998.

Bank Indonesia has said that, as long as the rupiah remains
stable and keeps inflation in check, the declining trend of its
rate would be continued.

The stable rupiah affects the prices of imported goods very
little, thus keeping inflation under control.

The country posted a modest inflation level of 2.48 percent
during the January-September period, according to the Central
Statistics Agency (BPS), which bodes well against the
government's full-year target of around 6 percent.

The central bank's declining rate is also to benefit the state
budget in servicing the domestic debt payments -- all in the form
of recapitalization bonds, the interest rates of which are mostly
tied to the movement of BI's interest rate.