Bank Indonesia Cuts Benchmark Rate to 5.50%

Bank Indonesia (BI) has decided to lower its benchmark interest rate (BI 7-day Reverse Repo Rate/BI7DRR) by 25 basis points (bps), from 5.75% to 5.50%. This decision was made at the BI Board of Governors’ meeting in Jakarta from Wednesday (21/8) to Thursday (22/8).

“The Deposit Facility interest rate drops 25 bps to 4.75%, and the Lending Facility interest also drops 25 bps to 6.25%,” BI Communication Department Director Junanto Herdiawan said in a press conference, Thursday (22/8).

Earlier on 18 July, BI has cut its benchmark interest rate by 25 bps or 0.25%. The deposit facility interest rate was also reduced 25 bps to 5% and lending facility to 6.5%.

Junanto explained that the policy of lowering the benchmark interest rate was consistent with low inflation forecasts that were below the midpoint of the target, attractive returns on investment in domestic financial assets which supports external stability, as well as pre-emptive measures to push forward economic growth momentum against the impact of global economy slowdown.

“The monetary operations strategy will continue to be directed to ensure adequate liquidity and improve money market efficiency in order to strengthen the transmission of accommodative monetary policies,” Junanto said.

He went on to say that macro prudential policies remained accommodative to encourage bank lending and expand financing for the economy, including environmentally friendly financing. Payment system policies and financial market deepening are also continuously strengthened to support economic growth.

“Bank Indonesia will continue to make accommodative policy mix in line with low inflation forecasts, external stability, and the need to continuously drive economic growth momentum,” Junanto explained.

Coordination of Bank Indonesia with the Government and related authorities, he added, continues to be strengthened to maintain economic stability, generate domestic demand, and increase exports, tourism, and foreign capital inflows, including foreign direct investment (PMA). (BI Communication Department/ES)

Translated by: Ridwan Ibadurrohman
Edited by: Mia Medyana