JP/13/Blum

JP/13/Blum

SBI rate down to 10.68%

The Jakarta Post
Jakarta

Bank Indonesia on Wednesday cut its benchmark interest rate to
10.68 percent, a day after newly-appointed central bank Governor
Burhanuddin Abdullah pledged to maintain the current declining
trend in the rate.

The interest rate on one-month Bank Indonesia SBI promissory
notes was previously at 10.80 percent.

The central bank has been guiding down its benchmark rate over
the past year amid a benign inflation environment and an
appreciation in the exchange rate of the rupiah against the U.S.
dollar.

Early last year, the rate was still hovering at more than 17
percent. The lower rate would ease the burden of the government
in servicing its domestic debts.

But Burhanuddin expected the rate cut could help trigger banks
to boost lending to the corporate sector to accelerate the
country's economic growth.

"I can still see room for further cuts, hopefully it can reach
a level below 10 percent," Burhanuddin told reporters.

Throughout 2002, the central bank recorded new loans expanded
by banks amounting to Rp 62.5 trillion (US$7.3 billion), a slight
increase compared with Rp 56 trillion handed out the year before,
when the SBI rate was were still hovering at around 18 percent.

Despite the cut in the SBI rate, the rupiah closed at a fresh
21-month high on Wednesday as foreign investors apparently
continued to park funds in local capital markets amid rising
optimism over the nation's economic fundamentals, dealers said.

The rupiah closed at Rp 8,310 per U.S. dollar, higher than
8,360 Tuesday.