JAKARTA: Bank Indonesia (BI) should have enough space to cut its interest rate by 25 basis points because inflation remains under control and there is adequate liquidity in the industry, bankers have said.
The central bank has maintained its benchmark interest rate at 7.5 percent for 10 consecutive months.
Bank Permata president director Roy Arman Arfandy said the full-year 2015 inflation, which stood at 3.35 percent, was below targets set by the government and the central bank.
Meanwhile, bank liquidity was also in fairly good condition, according to Arman, who added that both factors could be used as indicators to push down BI’s interest rate. However, he believed the central bank would adjust the interest rate gradually.
“I do not want to precede BI, but I see there is an indication for a decline there. I do not have the authority to say, but I see a sign of cutting,” Roy said on Wednesday as quoted by kompas.com.
Likewise, BNI president director Achmad Baiquni considered that inflation would remain under control in 2016. In addition, the government has been speeding up budget absorption, with tenders for infrastructure projects carried out at the beginning of the year.
“I expect there will be room for BI’s rate cuts, at least 25 basis points for the acceleration of our economic growth,” Baiquni said.
The central bank on Wednesday held its first policy meeting of 2016, which will take two days instead of one like previous meetings. The central bank also invited Coordinating Economic Minister Darmin Nasution to the monthly meeting, to discuss assessment results from the monetary sector, financial systems stability, payment systems and rupiah management.
Meanwhile, decisions on policy mix and the BI rate announcement would be made on Thursday, the second day of the meeting.
