Bank Indonesia keeps BI rate at 7.5%

                               

Bank Indonesia (BI) announced on Thursday that it would keep its benchmark interest rate at 7.5 percent despite the US Federal Reserve earlier announcing it had increased its rate 25 basis point.

The Fed also raised the rates on other facilities, namely interest on the reserves of other banks and its discount borrowing rate.

Bank Indonesia said its reserves reached US$100.2 billion, equal to seven months of import value, which was safe as it was more than the standard three months.

"The banking system is strong with a capital adequacy ratio of more than 20 percent or 20.8 percent and nonperforming loans [NPL] are below 5 percent, which is 2.7 percent for gross NPL or 1.4 percent for net NPL," said BI head of communications Tirta Segara.

The Fed's rate hike has not affected the Indonesian market much, with a 1.61 percent increase in the Jakarta Composite Index (JCI) on Thursday, an economist said.

The index stands at 4,555.96. The Basic Industries sectoral index led the movement with a 2.19 percent increase followed by the Manufacturing Index and the Consumer Goods Index with 1.88 and 1.86 percent increases, respectively.

INDEF economist Berly Martawardaya said improvements in the market were a result of the speculation over when the Fed would raise its benchmark rate being over.

"The rate increase [0.25 percent] matches investors' predictions, so the announcement from the Fed was no shock and BI’s decision to keep the BI rate the same was expected. There is not much room to lower the BI rate, perhaps in the next few months if monetary conditions are more stable" He said.

President Joko "Jokowi" Widodo said on Thursday that the increase in the Fed rate meant the end of uncertainty.

The Fed said in a statement after its latest meeting that it was lifting its key rate by a quarter of a point to a range of 0.25 percent to 0.5 percent. Its move ends an extraordinary seven-year period of near-zero borrowing rates, but the Fed's statement suggested that rates would remain historically low well into the future, saying it expected "only gradual increases." (dan)

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Nama : Eka dentya

Kelas : 4EA19

Dosen : Zainal Riadi, SPd., MSas