REPUBLIKA.CO.ID, JAKARTA - Bank Indonesia (BI) increased its benchmark interest rate or BI rate by 50 basis points, from six percent to 6.50 percent on Thursday. Earlier in June 2013, BI  increased the interest rate by 25 basis points.

"BI also increased savings deposit facility rate by 50 basis points to 4.75 percent and interest rate lending facility or credit facility to 6.75 percent," Executive Director of Department of Communication BI, Difi A Johansyah said on Thursday.

The policy is adopted to ensure that rising inflation after fuel price hike can soon return to its target trajectory. BI rate is an instrument of BI to manage inflation. If inflation is higher than normal, BI will rise the BI rate to control it.

While Governor of BI, Agus Martowardojo said inflation was estimated at 7.2 percent and could also reach 7.8 percent year on year. The high of inflation was due to higher transportation fares which are contrary to initial expectation. Martowardojo said the minimum level of inflation at 7.2 percent could be achieved if transport fares and volatile food could be controlled.  

President Director of PT Bank Pembangunan Jawa Barat - Banten (BJB), Bien Subiantoro said earlier that if BI increased its interest rate then BJP would hike its deposit rates.

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