BI Rate Eases 25 bps to 6.50% - Bank Sentral Republik Indonesia
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April 19, 2019
No. 11/22/PSHM/Humas

Today, in a decision by Bank Indonesia, the BI Rate has been lowered 25 bps to 6.50%. The decision to ease the BI Rate was taken after the Bank Indonesia Board of Governors Meeting concluded that inflation would maintain a declining trend in view of the present limited domestic demand and steady decline in inflation expectations. The Board of Governors also believes that the reduction in the BI rate is consistent with the Bank Indonesia inflation target. Despite this, Bank Indonesia sees the likelihood of rising inflationary pressure in 2010, fuelled by growing domestic demand and increases in international market commodity prices. Within this context, monetary policy will be directed so that this increased inflationary potential can be better anticipated for achievement of the approximately 5% inflation target for 2010.

The Board of Governors sees potential for steady improvement in the Indonesian economy. Renewed activity in the global economy, led by Asian emerging markets, has spurred the performance of economies in the region, including Indonesia. Recent indicators suggest that Indonesia's Q3/2009 economic growth rate has potential to surpass earlier forecasts, mainly on the strength of improvement in household consumption spending and exports. In response to these developments, economic growth during 2009 overall is predicted to remain on track with the upper limit of the 3.5%-4.0% projected range.

In the financial sector, improvement is visible in the bank interest rate response to cuts in the BI Rate. Bank lending has begun to gain momentum, although expansion remains very slow. The constrained lending performance is explained mainly by persistently slack demand for credit in response to the current low levels of investment. On the micro level, the banking industry remains in stable condition, as reflected in the continued high CAR and subdued NPLs at below 5%. Given the present strength of banking industry fundamentals, bank lending is predicted to expand further as conditions in the real sector become more conducive. Bank Indonesia, the Government and the banking system will continue to coordinate actions in optimising the bank intermediary function during the second half of 2009.

A complete account of the deliberations of the Board of Governors’ Meeting for August 2009, presenting macroeconomic and monetary developments, is published in the Monetary Policy Review (MPR).

Jakarta, 5 August 2009
Bank Indonesia

Office of the Governor

Dyah N.K. Makhijani
Director

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