Jakarta (Antara Bali) - The Indonesian benchmark interest rate may further fall 75 basis points to 6.75 percent at the end of this year, since the inflation rate remained controllable and external pressures eased, an economist has said.
It will not take long for Bank Indonesia (BI) to slash the benchmark interest rate, locally known as the BI Rate, Standard Chartered Banks senior economist, Aldian Taloputra, said here on Monday.
He predicted that BI will cut the key rate by 25 basis points to 7 percent in February 2016, and another 25 basis points to 6.75 percent in the second quarter of 2016.
The central bank slashed the key rate by 25 basis points this month to 7.25 percent after keeping it unchanged at 7.5 percent for a eleventh straight month in a row.
"After that, the BI will stop slashing it while assessing the situation once the Fed raised its rate," he said.
Besides the controllable inflation rate, the improving domestic economic fundamentals will also give more room to BI to slash its key rate again, he said.
He predicted that the inflation rate will stay at 4.6 percent in 2016, having eased to a level of 3.35 percent last year.
Administered prices will significantly contribute to the 2016 inflation rate due to a decline in global oil prices, he said.
The global oil price is expected to stay at US$40 per barrel and the retail price of premium gasoline will fall to Rp6.300 per liter, he said.
"This will maintain the publics purchasing power," he said.
In the meantime, the prices of volatile foods such as horticultural commodities can be kept in check as this years weather will not be as bad as last years, he said.
He believed that the US Federal Reserve will raise its rate for one more time only as the US economic recovery is expected to fall short of expectation. (WDY)
