JAKARTA: The central bank will likely keep the benchmark interest rate unchanged today amid uncertain global condition and oil price, according to most economists surveyed by Bloomberg and Bisnis Indonesia.
Eleven of 16 financial institutions in the survey forecast Bank Indonesia will keep the benchmark interest rate at 6.0%. Those institutions include Bank Mandiri, Forecast Singapore, Bahana
Securities, and Danareksa Sekuritas.
“We expect BI Rate to stay at 6% because there has not been any certainty on oil price and global condition,” said Destry Damayanti, head economist at PT Bank Mandiri Tbk.
However, other economists are optimistic that the central bank will cut the benchmark interest rate in line with the stable inflation.
Provided annual inflation rate at 3.65% in January, the central bank has enough space to cut the rate by 25-50 basis points to 5.5%-5.75%, said Ryan Kiryanto, a senior economist at PT Bank Negara Indonesia Tbk (BNI).
“But ideally the rate may drop by 25 points to 5.75%, as there is possible inflation pressure next month because of administered prices – the subsidized fuel price and electricity tariff,” he explained.
He mentioned that the safest choice is to keep the rate at 6.0%, considering uncertain global economy. However, the central bank may consider public expectation and the most objective and rational choice is to cut the rate by 25 basis points.
There is a possibility to cut BI Rate despite risks of uncertain increase on subsidized fuel, said Anton Gunawan, head economist at PT Bank Danamon Tbk.
“The opportunity (to cut the interest rate) is now because the increase on subsidized fuel price has not been decided,” he said.
Aziz Hasibuan, an analyst at DBS Group Research, also predicts a possible cut by 25 basis points. However, he thinks that the measure will give no impact to the deposit interest rate of commercial banks.
No impact
“If there is a cut of overnight deposit interest rate, the cut of benchmark interest rate by Bank Indonesia is predicted to give no impact to the rate in the market,” he said in a written statement.
The room for Bank Indonesia deposit facility [Fasbi] interest rate is limited because it is below the mid range of expected inflation, he added.
However, if Fasbi interest rate stays for the next few months, the trend of declining interest rate in three years will end.
BI dalam 2 bulan terakhir lebih memilih mempertahankan BI Rate di level 6,0% setelah pada Oktober—November dipangkas 75 poin dari sebelumnya 6,75%.
The central bank in the past two months has decided to keep BI Rate at 6.0% after lowering it twice in October and November by 75 basis points from 6.75%.
However, the central bank last month chose to cut the lower range of inter-bank rate to 200 points from 150 points from the benchmark 6.0%. It means that banks may set lending rate for other banks at the lowest rate of 4.0%. (T04/msw)
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