The Bitter Pill to Cure Deficits
Bank Indonesia (BI) has no choice but to administer another bitter pill to Indonesia’s economy. Instead of lowering the BI 7-Day Repo Rate, BI held it at six percent.
If only this benchmark rate had gone down, there could have been a series of positive effects to look forward to. Bank deposit and loan interest rates might be dragged down. Businesses could enjoy a cheaper cost of capital. Then eventually it would invigorate the economy.
Looking at the global perspective, the opportunity to lower interest is there. The Federal Reserve send out signals that it will not raise its interest rates. The Fed will also...