Quote From Jakarta Globe by: Dion Bisara | January 17, 2012
Bank Indonesia will cut the interest rate of its overnight deposits facility for commercial banks by 50 basis points to 4 percent, effective today, in a bid to stimulate growth and encourage banks to lend more.
The move will bring the rate, called Fasbi, 2 percentage points below the BI benchmark policy rate, which is currently at 6 percent. The Fasbi rate applies to idle money that private banks leave with the central bank when they have excess liquidity. The rate will not apply to banks’ statutory reserves at the central bank.
“The lowering of the overnight corridor should discourage banks from parking money with BI,” Difi Johansyah, a spokesman for the central bank, told reporters on Tuesday.
Difi added that amid global economic uncertainties, BI needs to make sure that liquidity remains strong in the banking system.
Economists said the central bank had eased its monetary stance to spur growth amid gobal uncertainties, without having to cut its policy rate.
The central bank resisted cutting its benchmark rate last week for a second consecutive month as a precaution to a possible acceleration in inflation this year due to a government plan to raise electricity tariffs, and ban private cars in Java and Bali from using subsidized fuel.
“This is an unofficial rate cut. The BI rate is becoming less relevant right now. This also shows that BI actually is not too concerned about inflationary pressures,” said Fauzi Ichsan, an economist at Standard Chartered Bank in
In September 2011, BI widened the spread between the Fasbi rate and BI rate to 150 basis points from 100 basis points previously. The BI rate at that time was 6.75 percent and the Fasbi rate was brought to 5.25 percent from 5.75 percent previously.
Fauzi said that with the lower Fasbi rate, lenders would have more liquidity and therefore be able to lend more cheaply.
Indonesian banks are aiming to boost lending by 23.6 percent this year, deputy governor Halim Alamsyah said last week, citing the banks’ business plans that are regularly reported to the central bank.
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