BI Rate Increase as Signal to Tighten Monetary

Jakarta (Antara) - The increase in Bank Indonesia (BI) benchmark interest rate (BI rate) from 5.75 percent to 6 percent is signal to tighten the monetary policy for the next six months, economist Fauzi Ichsan has said.

"This is a signal that BI will strengthen its monetary policy for the next six months. The BI rate increase will raise the Central Bank's credibility," the economist from Standard Chartered Bank said here on Thursday.

According to him, it was BI governor's bold decision to increase the BI rate.

"It is out of my assumption," Fauzi said, adding that such decision took the attention of the House of Representatives (DPR) and politicians, that so far asked BI to push the interest rate.

He said further that banks will respond the BI rate increase by raising the interest rates, but it will not leave significant impact to the community.

Previously, Bank Indonesia (BI) Governor Agus Martowardoyo said the decision was part of a mixture of policies in response to expectation of an increase in inflation and at the same time to maintain macro economic stability and financial system stability amid global financial uncertainties. (*)