By: Achmad Irfandi *)
Jakarta, CIDISS – BI Rate by Bank Indonesia in line with economic data and inflation under control in early 2016, by lowering the benchmark interest rate (BI Rate) to 7 percent was responded positively by economic sector of Indonesia. In connection with the downturn, Bank Indonesia lowered the BI Rate which previously 7 percent to 6.75 percent. Then how the impacts will be accepted by Indonesia, particularly in the field of macro-economy as optimism shown by BI through a policy of reduction in the BI Rate.
As is known, the central bank lowered the benchmark interest rate / BI Rate at the level of 7 percent by 25 basis points to 6.75 percent on March 18, 2016. Based on the results of the meeting of the Board of Governors of Bank Indonesia, Bank Indonesia decided to lower the BI Rate by 25 bps to 6.75 percent. This decline is expected to further facilitate the acceleration of lending amid macro stability remains well controlled.
In connection with the BI Rate, Executive Director of the Economic and Monetary Policy Bank Indonesia (BI) Juda Agung reveal the reasons for the decline in the BI Rate or benchmark interest rate this month. According to him, the decline in BI rate that occurred this month in the figure of 6.75%, one of them to fix the still weak domestic demand due to global economic conditions. He said that, although domestic demand still has not returned to its original state, the exchange rate has subsided due to the influence of fluctuations in the USD and other currencies. The Fed decided last night more dovish (lower) than expected market. It became one of the factors as well. BI has to know that the Fed will raise interest rates the central bank twice a year. Moreover, we can no longer expect export growth this year is better encouragement of domestic monetary and therefore should be encouraged. But our future course remain focused on reinforcing the transmission of interest rate cuts that immediately responded to the bank.
The decline in BI Rate will affect the continued decline in bank interest rates. This decrease may encourage the inflow of foreign capital into Indonesia through a stock exchange, the increase in foreign tourists, an increase in lending loans because the interest rate is getting smaller, the increase accelerated infrastructure projects, and in the long run will affect Indonesia’s economic growth. BI Rate is expected to lead to an increase in borrowing by economic agents that would encourage banks issue loans so that the economy will move. This is expected to support the capital in economic activity especially capital on medium-scale community efforts so as to accelerate the movement of the economy of Indonesia. Therefore, we as people of Indonesia can enjoy the impact of the decrease BI Rate to start thinking about business ideas and businesses that need and take into account the capital obtained from the bank of course with interest on the loan is not too high for the people of Indonesia. [AI]
*) Indonesia’s Political Economy Observer
