Here’s the Impact of BI Rate Cut on Burden-Sharing

Bank Indonesia (BI) cut its benchmark interest rate or seven-day reverse repo rate (BI-7DRRR) by 25 basis points (bps) to four percent in July 2020. Bank Indonesia Governor Perry Warjiyo said the decision was taken to lower the benchmark rate in line with low inflation forecasts up to the well-maintained external stability. 

"Interest cut is also a further step to boost economic recovery during the COVID-19 pandemic," Perry said in a virtual press conference on Thursday (7/16). Inflation in June 2020 was recorded at 0.18 percent month-on-month (MoM) or 1.96 percent year-on-year (YoY), down from the previous month's inflation of 2.19 percent (YoY). It is the lowest interest rate since the enactment of BI-7DRRR in April 2016. Based on BI's data, the benchmark interest rate was 5.5 percent in April 2016. Meanwhile, the highest level ever reached was six percent from November 2018 to June 2019.