New benchmark to bring interest rate lower soon; Analyst

Arif Gunawan Sulistiyono

The 7 days repo rate that will be positioned as benchmark interest rate starting this month is deemed to accelerate the transmission of monetary policy in Indonesia, leading to a more effective interest rate adjustment in the financial market.

Samuel Sekuritas economist Rangga Cipta said the new benchmark interest rate, which is set to replace Bank Indonesia (BI) rate starting August 19, would force the financial industry to leave the previous benchmark with longer maturity for the new benchmark.

“The impact to the monetary policy transmission should be faster from the usual period of six months to become much faster than that. And that the benchmark interest rate should be,” he said in an economic discussion in the sideline of Executives’ Meeting of Asia Pacific Central Banks (EMEAP) held in Bali on Saturday.

The more interesting question, he further said, would be what the Financial Service Authority (FSA) would do to follow up the changes in the benchmark interest rate, to assure that the policy could be transmitted effectively to the industry.

“Amid this situation, we also need to take a look on the yields of the government bonds as the rising capital inflows may lead to lower yields in the market. This, indirectly, accelerate the transmission of lower rates in the bond market,” he said. (ags)