JAKARTA - Board of Governor of Bank Indonesia on Thursday decided to cut benchmark rate BI 7-day repo rate by 25 basis point to 4.75 percent in order to stimulate loan growth, which ultimately support higher economic growth going forward. The decision is in line with estimation of Bahana Securities that the room for monetary easing is still opened.
According to Bahana Securities Economist Fakhrul Fulvian, with the move undertaken by Bank Indonesia, Bahana is confident that the room for monetary easing can still continue until end of 2017. “With a relatively stable until end of this year, strengthening of rupiah as well as improving trade balance, the room for monetary easing is still there,” said Fakhrul.
Bahana estimates that the inflation until end of this year would stay at 3.3 percent level, in line with Bank Indonesia’s projection, which expects the inflation to reach lower bank of its inflation target of between 3 to 5 percent. In term of trade balance, the worst of trade deficit has passed and at present Indonesia is entering an improved stage.
Bank Indonesia is also confident about this, as reflected in its statement, which stated that the recovery of economy in Europe and India is projected to grow higher than previous projection, although the US economy is expected to grow at slower pace than expectation. “For the first time after several Board of Governor’s meeting, BI mentions about the positive economic growth in India, signalling positive developments are underway,” Fakhrul said.
In its statement, BI has revised its statement on the global economy to “the global economy is recovering at slower pace and uneven. This shows that optimism is being built about the economy.”
Data released by IMF on June 2016 showed that the global trade grew at slower pace of only 3.95 percent per annum, compared to December 2015 position, which slowed down by 13.3 percent per annum. Meanwhile, the global trade volume slowed down by 3.4 percent from December 2015’s position of 11.4 percent. (*)