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Bank Indonesia leaves main interest rate steady

Bank Indonesia leaves main interest rate steady

(16 April 2015 – Indonesia)  Indonesia’s central bank left its main interest rate unchanged for a second consecutive month, keeping it at 7.5 percent.

Bank Indonesia governor Agus Martowardojo said it plans macro prudential policies that are more accommodative, including incentives for bank lending.

Limiting scope to cut borrowing costs in Southeast Asia’s largest economy are a current-account deficit that has hurt the rupiah, and a rise in inflation in March that could accelerate as the Ramadan festive season starts in mid-June.

The central bank held the rate it pays lenders on overnight deposits, known as the Fasbi, at 5.5 percent. The authority also kept the lending facility rate at 8 percent.

The central bank said economic growth would improve in the second quarter of 2015 after moderating in the first.

It forecast full-year growth at the lower end of its 5.4 percent to 5.8 percent target range.

It will give incentives through loan-to-deposit ratio requirements to banks who quickly meet goals for loans to small and medium enterprises, said Tirta Segara, a spokesman.

Bank Indonesia also plans to issue a rule broadening the definition of deposits in the loan-to-deposit ratio by including bonds issued by lenders, he said.

Loan growth in February was 12.2 percent year-on-year, below the central bank’s 2015 target of 15 percent to 17 percent, he said.

The economy grew 5.01 percent in the fourth quarter of 2014 from a year earlier, the slowest pace in more than five years.

The current-account deficit will be narrower in the first three months of this year than in the final quarter of 2014, Bank Indonesia said in the policy statement.

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