COMMERCIAL BANKS URGED TO LOWER INTEREST RATES

Jakarta, Dec 5 (ANTARA) - In order to stimulate the real sector, commercial banks should soon lower their interest rates following Thursday's lowering of the benchmark rate (BI Rate) to 9.25 percent, a business community leader said.

"The lowering of the BI Rate should be responded to by banks by also reducing their interest rates and repositioning their tight liquidity," MS Hidayat, chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said here on Friday.

He said the cut in the BI Rate was a positive signal for businesses and banks that the central bank was able to control inflation and the weakening of the rupiah against the US dollar.

The board of governors of Bank Indonesia (BI or central bank) decided on Thursday to lower the benchmark interest rate (BI Rate) by 25 basis points to 9.25 percent.

Hidayat expressed hope that BI would continue in stages to lower its rate by 25 basis points until it reached 8.5 percent in the first quarter of 2009.

The Kadin chief said what needed to be done next was to slacken the tight liquidity of banks. This was important because it would eventually induce the real sector to move.

Hidayat said businesspeople were now not yet willing to make new investment and committed only to continuing investment plans they had made previously.

"Investments in the gas, oil and other energy sectors are likely to go ahead until the middle of 2009 in line with previously made plans," he said.

He expressed hope that the government would soon realize its plan to provide stimuli for the development of the production sector.

"The government has to realize its plan to release funds to stimulate the real sector and the initiation of infrastructure projects," he said.