SBI rate down to 10.68%

SBI rate down to 10.68%

The Jakarta Post, Jakarta

Bank Indonesia cut its benchmark interest rate on Wednesday 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 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 said.

Throughout 2002, the central bank recorded new loans extended
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 still hovering at around 18 percent.

Despite the cut in the rate, the rupiah closed at a new 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.