Bank Indonesia Potentially Lowers BI Rate

BRI Chief Economist Anton Hendranata. Photo: Theresia Agatha/VOI

BRI Chief Economist Anton Hendranata projects that Bank Indonesia (BI) will cut the benchmark interest rate or BI Rate by 25 basis points at the Board of Governors' Meeting (RDG) which ends today, Wednesday, February 19.

"If you learn from the previous month, at the time of the Rupiah under pressure and it turns out that BI lowered the benchmark interest rate. It feels like today with the condition of the Rupiah there is nothing to worry about, there is an opportunity for BI to lower the interest rate again by 25 (points based)," said Anton when met after attending the Hipka National Working Meeting entitled "The Role of Hipka in the Success of the Prabowo-Gibran Program Achieves 8 Percent Economic Growth," at the Borobudur Hotel, Jakarta, Wednesday, February 19.

"So that it can support the economic growth we hope for," he continued.

Anton said, if BI again lowered the benchmark interest rate, later the quality of credit in banks would improve.

"The hope is that Bank Indonesia's benchmark interest rate will continue to decline more aggressively. In other words, if the benchmark interest rate drops more aggressively, the deposit interest rate will decrease, the lending rate will decrease. If the lending rate decreases, credit quality will improve," he said.

He believes that this is also one of the factors that boost Indonesia's economic growth.

"If that happens, it means, right, the economy will grow well. The bank will also expand its credit, which will be more flexible in this regard," he said.

On the other hand, said Anton, if BI sets the benchmark interest rate too high, it is feared that the quality of credit payments will be worsened.

"Because if interest rates are too high, whether you like it or not, it will definitely be related to quality of credit. Because debtors pay a lot of money, so his ability to pay is relatively limited. Yes, in the end, credit will be stuck in this," said Anton.

Even so, he continued, the reduction in the benchmark interest rate was not one of the main factors to boost economic growth.

According to him, the government also needs to pay attention to domestic demand. Anton assessed that currently the demand from the lower middle class society continues to decline.

"The interest rate is very much needed to go down, but it's not the only factor. What's important is whether there is demand in the economy? So, our research on interest rates is not the main factor," explained Anton.

"The important thing is, is the request okay? Well, the purchasing power of this lower middle class must be immediately overcome by its weaknesses through fiscal expansion from the government," he concluded.