BI holds key rates to accelerate reserve rules

| Updated: January 20, 2018 13:10:54

Bank Indonesia holds key rates

Bank Indonesia (BI) has kept its key interest rate unchanged, as expected, to give banks more liquidity and encourage them to invest money.

The central bank of the largest economic country in Southeast Asia on Thursday forecasted 2017 economic growth of 5.1 per cent.

The BI held the seven-day reverse repurchase rate at 4.25 per cent for a fourth straight month, as predicted by all 18 analysts polled by Reuters.

The deposit facility and lending facility rate, the floor and ceiling rates, were kept at 3.50 per cent and 5.00 per cent respectively.

The central bank said it would bring in faster plans to relax its reserve requirement for banks and would start similar averaging rules for foreign exchange deposits and Islamic banks.

Banks would still be required to keep an average of 6.5 per cent of their deposits at BI over a two-week period, but need only have a 4.5 per cent deposit each day.

That would give them 2.0 percentage points of flexibility, up from 1.5 per cent now, the report said.

For foreign deposits, banks would only be required to have a minimum 6.0 per cent daily reserve, but would have to maintain their reserves at an average of 8.0 per cent over two weeks.

However, loan growth remains stubbornly low. It has been below 10 per cent annually every month since the beginning of 2016, when the economy was hit by a commodity downturn.

The Bank Indonesia forecast 2017 economic growth of 5.1 per cent, and a growth range of 5.1 per cent to 5.5 per cent this year.

The statistics bureau of the country will announce 2017 fourth-quarter and full-year GDP growth data in early February.

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