REPUBLIKA.CO.ID, PALEMBANG -- The Office of the Coordinating Minister for Economy lauded the change in the central bank's benchmark interest rate from BI rate to "7-Day Reverse Repo Rate",that would expedite the process of bringing down lending rate to less than 10 percent a year.

"It will have effect on the lending rate. Currently the BI rate is 6.75 percent and the 7-Day Reverse Repo Rate will be 5.5 percent," Bobby Hamzah Rafinus, a deputy for monetary and fiscal coordination at the office, said here on Monday.

Bobby said from the beginning his office had recommended to the monetary authority to produce a monetary instrument that could have direct effect on transactions in the financial market.

"Coordinating Minister for Economy Darmin Nasution suggested to find a way that BI Rate would have direct effect on our financial market.Bank Indonesia (BI) than carries out a study resulting in 'reverse repo rate'," he said.

Bobby said no need to worry about possible inflation after the application of the new monetary instrument that would result in lower lending rate.

The government and BI have strengthened coordination to curb inflation in a year to come, he said, adding the government is set to keep the inflation target not higher than 4.7 percent.

It has been proven in the first three months of 2016 when inflation year-on-year averaged only 4.45 percent, he said.

"We have been skilled in keeping inflation under control . We are very serious in managing the prices of volatile foods," he said.

With inflation under control, banks would be encouraged to cut their lending rate to as low as one digit from an average of 12 percent by January 2016.

BI has announced plan to change the monetary instrument of BI Rate with 7-Day Repo Rate to be effective as from 19 August , 2016.

7-Day Repo Rate is an interest on transactions of conditional purchase of state securities (SUN) by banks from NI for 7 days with the obligation to sell back.

A director of state lender PT. Bank Negara Indonesia Tbk (BNI) Panji Irawan said "7-Days Reverse Repo Rate" would be more effective in cutting lending rates as the instrument is more active in financial market especially in inter bank financial market.

"In addition the lending rate is lower. The atmosphere is right," Panji said.

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