May 20, 2015

Indonesia - Indonesia holds key rate despite slumping growth

Follow Me on Pinterest
* Benchmark rate left at 7.50 pct, its level since Feb

* has faced political pressure to lower rates

* Loan policies will be changed to spur lending -

JAKARTA, May 19 (Reuters) - Indonesia's central bank held its key policy rate unchanged on Tuesday, as expected, shrugging off political pressure for a cut to help lift economic growth that has slumped to its slowest pace since 2009.

Instead of cutting rates - which it is loath to do as it battles inflation and wants to help the rupiah - Bank Indonesia (BI) said it will ease some restrictions to encourage banks to boost loans.

"To nurture the growth momentum, BI will loosen the reserve requirement policy for loan-to-deposit ratio, loan-to-value for mortgages and downpayment for car and motorcycle loans," it said.

No details were given, but BI has hinted since last year that it will relax some rules. Governor Agus Martowardojo said amended regulations should be issued by early June.

"It's hard to move, from the monetary side, but we have macroprudential (measures), we ease up on the brakes... BI still has room to manoeuvre", said Deputy Governor Perry Warjiyo.

Tuesday's policy meeting came two weeks after the government reported an annual growth rate of 4.71 percent in the first quarter, the lowest since the global financial crisis.

Before and after the growth announcement, Vice President Jusuf Kalla called for BI to lower interest rates.


Aldian Taloputra, economist with Mandiri Sekuritas, said BI is "trying to balance managing the risks in currency while supporting growth. That's why the central bank chose to loosen its macroprudential policies instead of cutting rates."

The benchmark rate has been 7.50 percent since February, when it was cut 25 basis points.

On Tuesday, the central bank also held its overnight deposit and lending facility rates at 5.5 percent and 8.0 percent.

BI targets year-on-year loan growth at 15-17 percent for this year. In March, loans grew 11.3 percent from a year ago, down from the previous month's 12.2 percent pace.

Annual headline inflation in April rose to 6.79 percent from March's 6.38 percent. Martowardojo has said annual inflation should be 4.2 percent at year-end, still within BI's target range of 3-5 percent.

Traditionally, the pace of price-rises increases during the Islamic fasting month of Ramadan, which this year begins in mid-June.

The rupiah rose as much as 0.2 to 13,100 per dollar, compared to Monday's close of 13,132. Before the central bank decision, the rupiah stood at 13,180. The rupiah has lost 5.6 percent against the dollar this year, making it the worst-performing Asian currency.

By Hidayat Setiaji and Gayatri Suroyo

(Additional reporting by Nilufar Rizki, Fransiska Nangoy and Randy Fabi and Jongwoo Cheon in Singapore; Editing by Richard Borsuk)

Business & Investment Opportunities 

Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. 

No comments:

Post a Comment