Last Thursday (19/11), the Central Bank -Bank Indonesia (BI) Board of Governors Meeting decided to lower interest rates in a bid to boost economic growth. BI lowered the BI 7-Day Reverse Repo Rate (BI7DRR) by 25 basis points to 3.75%, then the deposit facility rate to 3%, and the lending facility rate to 4.5%.
This decision was taken by considering low inflation, maintaining external stability, and as further steps to accelerate national economic recovery. Bank Indonesia remains committed to supporting liquidity provision, including Bank Indonesia's support for the government in accelerating the realization of the 2020 State Budget.
According to Governor of Bank Indonesia, Perry Warjiyo, the decision was to continue the rupiah exchange rate stabilization policy in line with market fundamentals and mechanisms. In addition, lowering interest rates is also intended to strengthen the monetary operation strategy to support accommodative monetary policy. The decision to lower interest rates also took into account several indicators that improved in October 2020. Some of the indicators are people mobility, food sales and online sales, manufacturing Purchasing Managers Index (PMI), and public income. External factors also show indicators of improvement, such as a surplus in the balance of payments in the third quarter of 2020, driven by improvements in the current account and financial capital transactions.
The lowering of the bank's benchmark interest rate is expected to lower lending rates to boost the economy. Export performance is now starting to increase. So, it is time for banks to start giving credit back to the business world. Efforts made by Bank Indonesia need to be supported so that Indonesia can rise from the current economic slowdown.