Only a matter of time until benchmark interest declines: BI governor

Only a matter of time until benchmark interest declines: BI governor

Bank Indonesia Governor Perry Warjiyo in Jakarta, Friday (6/21/2019) (ANTARA / Indra Arief Pribadi)

Jakarta (ANTARA) - Bank Indonesia Governor, Perry Warjiyo, stressed that he had opened wide opportunities for a "7-Day Reverse Repo Rate" reference rate for the foreseeable future, taking into account the easing of external pressure and the movement of capital flows in the balance of payments.

"We have also given a sign that in the future, there will be a decline in interest, (it's) just a matter of 'timing' (time) (depending on) the global or external (circumstances), or in particular, the impact on the balance of payments," he said.

Perry, who was met in Jakarta on Friday, said he wanted to give a firm policy direction that the Central Bank had now led to easing the monetary policy, even though until now it had not reduced interest rates.

The emphasis on the monetary policy was only realized with the attitude of the Central Bank, which decided to cut the ratio of rupiah statutory reserves in banks to 0.5 percent, effective as of July 1, 2019.

Perry said the Central Bank wanted to help provide a stimulus to domestic economic growth. In the first and second quarters, Perry acknowledged that the sources of economic growth had not worked optimally.

In the second semester, he hoped all the efforts of the Central Bank and the government would pay off, especially to encourage investment and exports, because the two contributors to this growth in the first semester of 2019 did not perform optimally.

"The key to increasing private investment both at home and abroad is, of course, policy synergy with the government," he said.

The Central Bank on Thursday (20/6) for the seventh time held the benchmark interest rate at six percent. However, BI loosened other instruments in the monetary policy by cutting the ratio of the rupiah GWM to 50 basis points (0.5 percent) for commercial banks and Islamic banks. The policy became a maneuver after BI implemented the calculation of the average reserve requirement (GWM averaging) in the past year.

By maintaining BI's benchmark interest rate at the level of six percent, the deposit interest rate of the banking fund at the BI (deposit facility) remains at 5.25 percent, and the interest rate for providing BI funds to banks (lending facility) remains at 6.75 percent.

BI considers economic growth to be between 5 percent and 5.2 percent for the whole year or lower than the midpoint of the initial projection at 5 percent and 5.4 percent. Meanwhile, the current account deficit in 2019 is estimated at 2.5 percent-3 percent of Gross Domestic Product.