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Morgan Stanley : BI needs to lower its benchmark interest rate

18 April 2019 02:56 PM  Company: []
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JAKARTA. Morgan Stanley, a financial institution, said that Bank Indonesia needs to open up the space to ease the monetary policy by lowering the benchmark interest rate or BI (Reverse) Repo Rate.

In Morgan Stanley's research entitled "Growth and Liquidity Cycles in Sync", it was stated that Bank Indonesia (BI) is predicted to reduce its interest rate by 75 bps in Q3 2019, following US Central Bank's policies which tend to dovish, low inflation, and current account deficits which starts to narrow.

"We believe the liquidity easing is needed by the system, amid improving credit demand and tighter liquidity after a 175 bps increase in the interest rate in 2018," Equity Analyst at Morgan Stanley Securities, Mulya Chandra said in the report quoted by Bisnis on Wednesday (17/4 / 2019).

According to him, the financial system in Indonesia requires liquidity easing. On the other hand, BI is encouraging credit growth by combining interest rate increases and easing prudential macro policies.

Morgan Stanley believes that banks will benefit greatly from the reduction in interest rates with an increase in net interest margin (NIM). (AM/AR)