Due to the political situation prior to the presidential election set for July 8, Indonesian central bank (BI) could cut rate benchmark by 25 basis points (bps) from the existing 7 percent, an analyst said in Jakarda on Monday.
Martin Panggabean, an economy analyst, said that even though it is not considered necessary, BI would reduce rate benchmark for political reason.
"The current economic situation in the country doesn't require an immediate rate reduction. But from political view, it is necessary. The race could be reduced by 25 basis points," the Detik.com quoted Martin as saying here.
The BI governor board meeting is scheduled to take place on July 3, or 5 days ahead the presidential election day. The meeting is predicted to the reduce rate benchmark to 6.75 percent.
Martin said that BI's rate reduction policy implemented lately is not effective since banks are still reluctant to reduce their lending rate charged to the public.
He furthermore predicted that such a policy would last in the third quarter this year.
"In the third quarter, BI would increase its rate benchmark to overcome the increasing of inflation rates and the prices of commodities in global market," he pointed out.
A Citibank economist said here over the weekend that BI is capable to reduce rate benchmark, down by 25 bps, following the inflation rate that continues to drop lately.
On a separate occasion on Monday, BI Deputy Governor Hartadi Sarwono predicted that the inflation rate could reduce to 3.8 percent in June, or far lower than it was in May that stood at 6.04 percent, the Detik.com reported.
Source: Xinhua
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