BI Rate cut by Bank Indonesia is not immediately followed by a decrease in bank credit interest rates. This is common because banks will make adjustments first before following the central bank’s steps.
“It will take about three months. That’s because the bank has to recalculate assets and liabilities or assets and liabilities. liabilities management” said banking observer Paul Sutaryono.
However, the BI Rate cut by 25 basis points (bps) to 6% is a breath of fresh air for the Indonesian economy. It is also said to be a positive catalyst for the capital market and the real sector in the country.
Paul said the decrease in the BI Rate would spur a decrease in credit interest rates in the near future.
“It will start with the thinning of deposit interest rates. Because the cost of funds will also thin. However, the transmission does not run immediately,” said Paul.
Furthermore, he said, the decrease in the BI Rate will also have an impact on the strength of the rupiah exchange rate against the US dollar, aka experiencing appreciation. That is also inseparable from the impact of the decline in the Federal Reserve (The Fed) or The Fed Fund Rate (FFR) benchmark interest rate.
It is known that Bank Indonesia cut the BI Rate by 25bps to 6% in the September 2024 Board of Governors Meeting (RDG). The reduction in the benchmark interest rate has actually been awaited by many parties because it is considered to support the performance of the economy in general. (H-3)
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