Economist Of Bank Indonesia Value Will Maintain Reference Interest Rate, Macro Conditions To Determine

Bank Permata economist Josua Pardede. (Photo: Capture screen from Infobank)

JAKARTA - Bank Permata economist Josua Pardede estimates that Bank Indonesia (BI) will maintain its benchmark interest rate at the level of 3.50 percent. This is because a number of macroeconomic indicators are in a well-maintained condition.

He noted, several economic benchmarks that were considered to be still solid, including sloping inflation at the level of 1.38 percent, foreign exchange reserves continued to rise at US $ 138 billion, the ratio of non-performing loans (NPL) was maintained at around 3 percent, as well as a foreign debt ratio that remains under the provisions of the law at 40 percent.

"So we see from a financial and economic perspective that our macro structure is still good," he said in a webinar on Monday, April 19.

Josua added that the monetary authority is deemed not to take advantage of the space to reduce interest rates if the goal to be achieved is to boost credit channeling activities in the community. This is because BI's gradual cut in interest rates over the past year has proven to be of little help to credit growth.

In fact, the current 3.5 percent benchmark interest rate is the lowest margin rate ever set by the central bank.

"I think the transmission of BI rate cut and several other accommodative policies has not been able to boost credit growth. Personally, I see it because of the demand side of the people who have not yet recovered due to the current pandemic factor, ”he explained.

The economic observer also explained that financial service institutions, particularly banks, had an important role in accelerating economic activity by optimizing the intermediation function.

"The banking sector is still very strategic because 75 percent of financial assets in Indonesia are in banks," he said.

For information, Bank Indonesia plans to release the latest benchmark interest rate this afternoon after holding a Board of Governors Meeting on 19-20 April 2021. Normally, the BI Governor as the leader of the institution will read out the rate interest setting.

On this occasion, the central bank will also elaborate various accommodative policies, such as the role of BI in supporting state administration through the purchase of government bonds, as well as support for enforced fiscal incentives.

For information, at the last RDG held in mid-March, Bank Indonesia decided to maintain the BI 7-Day Reverse Repo Rate (BI7DRR) at 3.50 percent. Apart from that, the monetary authorities also did not change the deposit facility interest rate, which was 2.75 percent, and the lending facility rate at 4.25 percent.