Flash Notes

Bank Indonesia (BI) formally announced a change to its benchmark policy rate to the 7-day reverse repo rate from the BI ratetoday. The BI rate has been the benchmark policy rate since July 2005. The central bank will also narrow the FASBI-Repocorridor to 150bps from 250bps. Based on the current 7-day reverse repo rate at 5.5%, it implies that the O/N deposit facility(FASBI) rate and lending rates will be at 4.75% and 6.25% respectively, effectively lowering the lending rate from 7.25% whiledeposit rate is unchanged. The benchmark rate change will take effect on August 19and the central bank will announce bothbenchmark rates in the interim period.