BI Rate Projected to Remain at 7.75 Percent

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  • TEMPO/Dasril Roszandi

    TEMPO/Dasril Roszandi

    TEMPO.CO, Jakarta – Bank Indonesia held a board of governors meeting on Thursday, December 11, 2014, to decide whether the BI Rate should be maintained at 7.75 percent. 

    Lana Soelistianingsih, an economist at PT Samuel Aset Manajemen, said the BI Rate could be maintained as long as the inflation rate remained the same following fuel price hike. 

    “Inflation rate hike has been anticipated when BI increased the interest rate by 25 base points during the governors' meeting on November 18,” Lana said. 

    According to Lana, BI might only increase the deposit facility rate (FasBI) to six percent to stimulate the rupiah’s liquidity from banks. 

    “The rupiah's weakening to above Rp12,300 per US dollar could be considered by the central bank,” Lana explained. 

    However, Lana viewed that the rupiah's weakening was not only caused by domestic factors, but also external ones. The US dollar's strengthening against strong currencies and plummeting oil prices contributed to the rupiah's weakening. 

    Lukman Leong, an analyst at PT Platon Niaga Berjangka, argued that the interest rate should be increased. 

    “In addition to the potential of inflation rate increase by two percent at the end of the year, increased BI rate will prevent foreign capital to be withdrawn from the financial market,” Lukman said.

    According to Lukman, the rupiah's depreciation reflected that risks were being transfered to safer assets, particularly the US dollar. Therefore, to anticipate capital withdrawal, the BI rate should be increased to eight percent.

    M. AZHAR