The rupiah volatility is still under control and the the country`s fundamentals are still good.
Jakarta (ANTARA News) - Bank Indonesia Governor Agus Martowardojo described as normal the rupiah weakening over the past week given the dynamic global economic trend.

The rupiah volatility is still under control and the the countrys fundamentals are still good, Agus said here on Friday.

The rupiah value in interbank transaction on Friday morning weakened to the level of 12,832 per US dollar.

Bank Indonesia is of the opinion that the global economic recovery in in process although not in all parts of the world. Agus said.

The US economy is predicted to grow faster than previously expected, he added.

Meanwhile, the Japanese and Chinese economy is expected to grow slower than expected previously and the European economic recovery also is predicted to be sluggish in line with the declining confidence of the consumers and the threat of deflation.

The condition has driven the European Central Bank to provide economic stimulus through Expanded Asset Purchase Program (EAPP).

Agus said the ECBs stimulus plan is expected to accelerate flows of foreign portfolio capital to emerging markets including Indonesia, although to could cause potential uncertainty and volatility in the global financial market.

"We must remain wary of the global economic developments. There are risk on risk off. Dollar is expected to gain and the currencies of emerging markets including Indonesia will weaken , but domestically our economy remains good," he said.

Agus also said the cut in Bank Indonesias benchmark interest rate (BI rate) followed with the decrease in saving facility interest rate (FASBI rate/deposit facility) are the form of support by the central bank for banking industry .

"There are significant amount of funds placed in the central bank that could be used again to improve liquidity to finance credits for productive activities," he said .

A meeting of the central bank leaders on Tuesday cut the BI Rate from 7.75 percent to 7.5 percent with facility deposit down cut by 25 basis points to 5.5 percent and Lending Facility rate remaining 8 percent.

Meanwhile, in response to the cut BI rate and FASBI, the Deposit Insurance Agency (LPS) announced on Wednesday that its guarantee interest rate on deposits in rupiah fund and foreign exchange in general banks and rupiah deposit in Bank Perkreditan Rakyat (BPR) for the period of 15 January 2015 to 14 May 2015 are unchanged.

LPS secretary Samsu Adi Nugroho said the interest rates on rupiah and foreign exchange deposits in general banks are 7.75 percent and 1.5 percent respectively and the interest rate on rupiah deposits in BPR is 10.25 percent.

LPS said the liquidity of banks is relatively high amid the slower growth of credits , now proportional with the growth of third party funds (DPK) held by banks.

In addition, the economic stability from the points of view of interbank interest rate, inflation and exchange rate is improving, Agus said.

"I think it the LPS authority to respond and they also have their own pints of consideration," he said.(*)

Editor: Heru Purwanto
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