BCA Economist: The Increase In BI Rate Is Not Necessarily Followed By The Increase In Credit Interest Rates

Head of Bank Central Asia (BCA) Economist David Sumual. (Photo: Doc. Antara)

JAKARTA - Head of Bank Central Asia (BCA) economist David Sumual said that the increase in the benchmark interest rate or BI-Rate was not necessarily followed by an increase in lending rates.

"BI-Rate has increased by 275 bps (accumulatively since August 2022), but lending rates for working capital and investment loans have only increased by 40-70 bps," David said in a written statement in Jakarta, quoted from Antara, Thursday, April 25.

In addition, added David, consumption credit interest rates such as home ownership loans (KPR) and motor vehicle loans (KKB) have actually decreased. He noted that KPR and KKB have decreased by 32 basis points (bps) since August 2022.

Even so, David considered that there were several considerations for banks to increase credit interest, one of which was competition in the industry. He said competition in the banking industry is currently relatively tight in several credit segments.

BI officially announced an increase in BI-Rate by 25 bps to 6.25 percent. The decision to increase the BI-Rate was taken through the BI Board of Governors Meeting (RDG) which was held on April 23-24, 2024.

As for the previous BI RDG on 19-20 March 2024, BI held the benchmark interest rate at the level of 6 percent.

David said that BI's decision was in accordance with expectations. BI, he said, seems to want to increase inflation in the midst of the weakening rupiah exchange rate (exchange rate) recently.

"The impact is that at least the stability and expectations of inflation can be maintained," said David.

As previously reported, BI Governor Perry Warjiyo on Wednesday said that the policy to raise interest rates was carried out to strengthen the stability of the rupiah exchange rate from the possibility of worsening global risk.

In addition, the increase in interest rates is also a pre-emptive and forward looking step to ensure inflation remains targeted at 2.5 plus minus 1 percent in 2024 and 2025 in line with the pro-stability monetary policy stance.