Interest rate can still go down: BI
Interest rate can still go down: BI
The Jakarta Post, Jakarta
Bank Indonesia said Friday there was still room for its bench-
mark interest rate to fall in the near future on the back of
easing inflationary pressure.
Bank Indonesia deputy governor Miranda Goeltom said that
expectation of a stronger rupiah towards the end of the year was
slowing down inflation.
"... Low inflation shows us there is room to further lower the
interest rate," Antara quoted Miranda as saying.
Miranda was commenting on data provided by the Central Bureau
of Statistics (BPS) a day earlier which shows July year-on-year
inflation slowed down to 10.05 percent from 11.48 percent posted
in June, signaling the government's single-digit inflation target
is still within reach.
Annualized inflation has been in a declining trend since
February, which has allowed Bank Indonesia to bring down the
interest rate of its one-month SBI promissory notes to around
14.93 percent compared to more than 17 percent earlier this year.
Miranda was optimistic that the declining inflation trend
would continue, in accordance with the expected solid display by
the local currency against the U.S. dollar in the future.
The rupiah closed at Rp 9,085 per dollar on Friday, an
appreciation of 12 percent since the start of the year.
A relatively stable domestic political scene, plus divestment
of assets held by the Indonesian Bank Restructuring Agency (IBRA)
would likely help stabilize the local unit, which in turn would
lower prices of imported goods.
This would help lessen the pressure on inflation.
"... And government plans to divest its stake in Bank Niaga
and Bank Danamon later this year makes us believe that the
chances of the rupiah to further strengthen are wide open,
stronger than the current level," she added.
On the monetary policy front, lowering the interest rate would
be made possible by controlling base money.
As of July, currency in circulation stood at Rp 115.3
trillion, far below Rp 125 trillion targeted by the International
Monetary Fund (IMF).
The central bank, following the BPS announcement, cut its
overnight intervention rate - the rate it offers commercial banks
to deposit money in Bank Indonesia - by 50 basis points Friday to
13.625 percent.
The rate is a signal of easing monetary policy.