JAKARTA (TheInsiderStories) – Bank of Indonesia (BI) recorded Rp5,645.8 trillion (US$403.27 billion) circulated money liquidity in January, grew by 5.5 percent from a previous year. In December 2018, the amount of circulated money increased by 6.3 percent.
The central bank reported, the slowdown was contributed by a decrease in net foreign assets and contraction of government financial operations, according to official statement released on Thursday (02/28).
Net foreign assets in January fell deeper by 9.3 percent compared to the previous month at 6.3 percent. The lower net foreign assets was caused by a slowdown bill to non-residents due to the decreasing of the foreign exchange reserves.
During January, banking loan grew by 11.9 percent, higher than 11.7 percent in December 2018. The weighted average of loan interest rate in January was 10.88 percent, also higher than the previous month. While, weighted average of saving deposits interest rate for 3, 6, 12, and 24 months maturity was 6.91 percent, 7.2 percent, 6.69 percent, and 7.27 percent respectively.
Previously BI’ Governor Perry Warjiyo noted that the inflows of foreign capital to the Indonesian market until Feb. 21, 2019 reached Rp45.9 trillion. He said, majority of this inflow entered through the government bond of Rp33.9 trillion and Rp11.3 trillion in shares and BI’ certificates of Rp1.1 trillion.
Recently, BI Governor Board decided to maintain a 7 day Reverse Repo Rate (BI 7-DRR) at 6 percent, a Deposit Facility interest rate of 5.25 percent, and a Lending Facility interest rate of 6.75 percent.
Warjiyo said, the decision is consistent with efforts to strengthen external stability, particularly to control the current account deficit (CAD) within a safe limit and maintain the attractiveness of domestic financial assets. The Bank also continues to pursue a monetary operations strategy to increase the availability of liquidity in driving bank financing.
Furthermore, he revealed, the decision was made in regarding to global and domestic conditions. He considered, world economic tends to be slowed, caused by reduced uncertainty in the global financial market.
He also rated, the increase in the Federal Reserves Fund Rate (FFR) interest rate is expected to be lower and the reduction in the central bank balance sheet becomes smaller than planned. Global economic and financial developments on the one hand provide challenges in encouraging exports, but on the other hand increase the inflow of foreign capital to developing countries, including Indonesia.
Warjiyo stated, the high reference rate will still be occurring in a short term. Though in the long term, he added, BI 7-DRR rate will be in lower point if stability can be maintained. In 2018, Bank of Indonesia has increased the 7-DRR rate by 175 basis points to 6 percent.
While, Indonesia Vice President Jusuf Kalla once again suggested BIto cut its rate. He considered the high reference rate may be followed by high banking interest rate and obstruct capital market growth.
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