Bank Indonesia Considers to Further Raise Interest Rate

Jakarta, MINA — Bank Indonesia Governor Perry Warjiyo said the Central Bank is considering to further raise its benchmark interest rate to meet external pressure on the national currency.

The central bank would take further monetary steps by the end of June that could be another increase in benchmark interest rate and relaxation of loan for house (Loan to Value), Antara News quoted Perry as saying here on Tuesday.

He said the Central Bank would be consistent in applying the pre-emptive policy and to continue to be ahead of the curve to meet the pressure against stability as a result of the increase in the fund rate of the U.S. Central Bank, and the policy of the European Central Bank.

“Bank Indonesia is ready to launch a pre-emptive , front loading and ahead of the curve policy . Further step could be raising the interest rate and at the same time relaxation of LTV policy to boost the housing sector,” he said here on Tuesday.

In addition the central bank would continue to optimize double intervention in the state securities and foreign exchange market and while keeping a loose liquidity, he said.

He said he was confident the Indonesian economy, especially financial asset market will remain strong that would attract foreign as well as domestic investors.

Bank Indonesia already raised its benchmark interest rate twice this year from 4.25 percent to 4.5 percent and to 4.75 percent in a bid to meet the global financial market pressure on rupiah.

Creating stability of rupiah value

The external pressure came with the normalization of the U.S. monetary policy and improvement in the U.S. economic data that resulted in reversal in the flows of funds previously flowing into developing economies including Indonesia.

Bank Indonesia is now applying a monetary policy heading toward tight bias and is set to optimize the room still available for raising the benchmark interest rate depending on the economic condition.

On Monday , Perry said Bank Indonesia will focus on maintaining economic stability such as by creating stability of the rupiah value against the U.S. dollar.

“Currently is the top priority for Bank Indonesia,” he said in Sukoharjo.

Perry, however, predicted that foreign funds would return back to the country later this month.

“We will provide the best service in welcoming the funds flowing back to the country starting June 19,” he said. (AS/a014) (T/RS5/RS1)

Mi’raj Islamic News Agency (MINA)