JAKARTA (TheInsiderStories) – The Indonesia Deposit Insurance Corporation (IDIC) predicts, that the increase in Rupiah and foreign exchange deposit rates will be limited this year. The reasoned, Bank Indonesia 7 day reverse repo (BI-7DRR) rate and the Federal Reserves Fund Rate (FFR) are predicted to move dovish.
Based on the Liquidity Indicators issued by IDIC, the average Rupiah deposit rate at the end of December 2018 6.15 percent, an increase of 10 basis points (bps) from the the previous month, said the director Doddy Ariefianto today (01/16). While, the average foreign exchange deposit rate increased by 7 bps last month to 1.23 percent.
The same thing happened at the average minimum interest rate which increased 4 bps to 4.99 percent and the maximum interest rate which increased 16 bps to 7.31 percent.
In term of special rate of one-month tenor deposit, the banks with BOOK III level are recorded providing the highest interest rate, which is 7.73 percent at the end of December 2018. Last month’ the special rate in the Book III group rose 28 basis points (bps) from the end of November 2018, higher than the increase in other groups, which ranged from 20-23 bps.
“The prospect of a reverse repo BI 7-day and Fed rate which is now more dovish indicates the limited increase in interest rates on rupiah and foreign exchange deposits in the future,” said Ariefianto.
Meanwhile, related to credit growth, he believed that it will continue to improve, along with the strengthening of domestic economic activity. In 2019, credit is predicted to grow 12.4 percent, while growth in deposits is expected to reach 9 percent.
“With developments like this, managing liquidity is one of the most important things that banks need to pay attention to this year,” he stated.
Meanwhile, the credit position in October 2018 grew 13.5 percent in annual basis (YoY). In the same month, deposits grew 7.6 percent or higher than September 2018 which reached 6.6 percent.
The loan to deposit ratios position of the industry declined to 93.39 percent from 93.06 percent in September. Banks in the BOOK IV group appeared to be the main drivers of the movement of credit and deposits. In October, the BOOK IV banks posted credit growth of 15.88 percent and deposits of 11.49 percent.
“Specific conditions of liquidity in each bank group can have implications for the movement of interest rates that are not uniform,” he said.
In relation to BI-7DRR rate, the appreciation of the Rupiah, low domestic inflation, as well as the increase in the FFR will limit the central bank’ move to raise interest rates in the near future. On the other hand, the decline in the benchmark rate is limited by the current account deficit which is still quite large.
“Therefore, the reverse repo BI-7DRR rate will still be stable at the level of 6 percent at the beginning of 2019,” he said.
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