UPDATE 1-Indonesia c.bank keeps rates on hold and relaxes car loan rules
(Add governor, comments from economists)
* The Bank of Indonesia maintains its key rate at 4.00%
* Reduction of down payments for green vehicle loans
* C.bank cut its key rate by 100bp so far in 2020
* Governor: more effective quantitative measures to support GDP
JAKARTA, Aug. 19 (Reuters) – Indonesia’s central bank kept its policy rate unchanged on Wednesday, prioritizing market stability, but relaxed some lending rules to boost consumption in the pandemic-stricken economy .
The move came after Southeast Asia’s largest economy shrank 5.32% in the second quarter, more than expected, and amid a growing number of coronavirus cases in the country.
Bank Indonesia (BI) kept the 7-day repo rate at 4.00%, already the lowest since at least 2016, when it started using the rate as a benchmark, as expected by most economists in a Reuters poll.
BI has cut the policy rate four times this year, totaling 100 basis points (bps), in response to the pandemic. These are in addition to cuts totaling 100 basis points in 2019 to support economic growth.
The central bank on Wednesday removed down payment requirements for the purchase of environmentally friendly vehicles, effective Oct. 1, for lenders with low non-performance ratios. Previously, the deposit was 5-10%.
“We believe that quantitative measures are more effective in supporting economic recovery. In what way? Monetary easing through the banking system, ”Governor Perry Warjiyo said during an online news briefing, noting that keeping the benchmark rate unchanged would keep the spread attractive to foreign investors.
Warjiyo said the central bank would monitor developments in the economy, financial markets and coronavirus cases in its future monetary policy review.
BI has so far injected 651.54 trillion rupees ($ 44.17 billion) in cash this year. He also agreed with the government on a plan to finance the $ 40 billion budget deficit that involves the central bank buying $ 28 billion worth of bonds while waiving interest payments.
Wisnu Wardana, an economist at Bank Danamon in Jakarta, said BI had likely completed its rate cuts for the year, with the governor’s comments signaling that policymakers were comfortable with signs of an economic recovery.
Alex Holmes of Capital Economics, however, said there could be further easing ahead, with high-frequency data suggesting the recovery has started to slow, but “provided the rupee does not experience a new bout. of weakness “.
The rupee, recently under pressure from global uncertainties, gained 0.5% against the dollar, as the main stock index extended its losses after the announcement.
The number of coronavirus cases in Indonesia has reached 144,945, up 75% in about a month since the last BI meeting, while 6,346 people have died from the COVID-19 disease.
The government has forecasted a slight contraction or stable growth in the economy this year, but some analysts believe the GDP will contract – the first time for the resource-rich country since the Asian financial crisis of 1998 ($ 1 = 14 750,000 rupees) (Report by Gayatri Suroyo, Fransiska Nangoy and Tabita Diela; Editing by Jacqueline Wong)