Bank In­done­sia steps up ac­tion as political pres­sure mounts

The Pak Banker - - FRONT PAGE -

JAKARTA: In­done­sia's cen­tral bank re­duced its main in­ter­est rates and re­serve ra­tio for lenders, tak­ing more de­ter­mined ac­tion to boost the econ­omy in the face of political pres­sure. Gov­er­nor Agus Mar­to­war­dojo and his board low­ered the bench­mark ref­er­ence rate by 25 ba­sis points to 7 per­cent, Bank In­done­sia said Thurs­day. That's in line with the fore­casts of 17 of the 28 econ­o­mists, while the rest pre­dicted no change. The mon­e­tary au­thor­ity also low­ered the re­serve-re­quire­ment ra­tio for lenders by 100 ba­sis points to 6.5 per­cent.

Fall­ing crude prices are help­ing to curb in­fla­tion in In­done­sia, giv­ing pol­icy mak­ers room to fo­cus on sup­port­ing an econ­omy that ex­panded last year at the slow­est pace since the end of the fi­nan­cial cri­sis in 2009. Pres­i­dent Joko Wi­dodo said in an in­ter­view last week that he wants to see in­ter­est rates fall fur­ther to spur growth, a view echoed on Thurs­day by the eco­nomic affairs min­is­ter.

"Marginally, it's more ag­gres­sive than ex­pected," Wel­lian Wi­ranto, an econ­o­mist in Sin­ga­pore at Oversea-Chi­nese Bank­ing Corp., said by phone, adding a smaller re­duc­tion in the re­serve ra­tio had been a pos­si­bil­ity. "This might not be the last cut." Bank In­done­sia also low­ered the rate it pays lenders on overnight de­posits, known as the Fasbi, to 5 per­cent from 5.25 per­cent, while the lend­ing fa­cil­ity rate was re­duced by the same mag­ni­tude to 7.5 per­cent. Stocks rose and the cur­rency fell af­ter the an­nounce­ment. The Jakarta Com­pos­ite In­dex rose 0.3 per­cent af­ter nearly eras­ing an ear­lier in­crease on Thurs­day, while the ru­piah pared gains af­ter the de­ci­sion to close 0.1 per­cent stronger at 13,503 a dol­lar, ac­cord­ing to prices from lo­cal banks. Two-year govern­ment bonds ex­tended losses, push­ing the yield up six ba­sis points to 7.65 per­cent. "The de­ci­sion to lower the re­serve-re­quire­ment ra­tio was a sur­prise," Miles Rem­ing­ton, head of eq­ui­ties at BNP Paribas Se­cu­ri­ties In­done­sia, said by email. "The move should fur­ther boost con­fi­dence among in­vestors on In­done­sia."

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.