Finally! Bank Indonesia Cuts Reference Interest Rate 25 Basis Points To 3.50 Percent

Illustration of rupiah currency. (Photo: Doc. Antara)

JAKARTA - Bank Indonesia (BI) decided to lower the BI 7-Day Reverse Repo Rate (BI7DRR) by 25 basis points to 3.50 percent from 3.75 percent previously.

In addition, the monetary authorities also set the Deposit Facility interest rate at 2.75 percent and the Lending Facility rate at 4.25 percent.

BI Governor Perry Warjiyo said this decision was based on the consideration of the low rate of inflation in the country and the maintenance of the rupiah exchange rate against foreign currencies.

"On this basis, Bank Indonesia feels the need to lower interest rates in order to encourage efforts to recover the national economy," he said in a virtual press conference, Thursday, February 18.

Perry added that his party will also coordinate with the government and the Financial System Stability Committee (KSSK) to address supply and demand side problems in lending and financing.

"This is important so that the business world and priority sectors can support economic growth," he said.

Meanwhile, several other matters that become BI's priorities are to continue strengthening the monetary operation strategy to support the accommodative monetary policy stance.

"The monetary authority is committed to continuing the rupiah exchange rate stabilization policy in line with market fundamentals and mechanisms," he said.

In addition, Perry said that Bank Indonesia would also seek to loosen the provisions for down payments for motor vehicle credit / financing to at least 0 percent for all types of new vehicles.

"This is intended to encourage credit growth in the automotive sector while still paying attention to the principles of prudence and risk management, which will be effective from March 1, 2021 to December 31, 2021," he said.

For information, throughout 2020 Bank Indonesia has lowered the benchmark interest rate by 175 basis points. Meanwhile, this is the first cut in 2021. So, starting from January 2020 to February 2021, the central bank has lowered interest rates by 200 basis points.