REPUBLIKA.CO.ID, JAKARTA -- Indonesia's central bank, Bank Indonesia (BI), has been advised to wait until the second quarter of this year before providing policy relaxation because growth in Indonesia is still below normal.

"BI must remain cautious as the relaxed policy could trigger a high inflation risk in the mid-term," Economist Su Sian Lim of the Hong Kong and Shanghai Banking Corporation Limited (HSBC) for the ASEAN region said during an HSBC Economic Outlook 2016, which was based on the theme: "ASEAN Economic Community: Indonesia to Punch Above Its Weight" in Jakarta on Thursday.

However, the HSBC economist praised BI for adopting measures that complement the government's steps through the adoption of an interest rate policy and the reduction of a reserve ratio requirement (GWM).

"BI has cut its benchmark interest rate by up to 75 basis points and its GWM by 150 basis points since November 2015," Su said.

Su also appreciated the Financial Service Authority (OJK) for urging banks to lower their lending rates by up to 400 basis points this year from 13 percent to 9 percent.

"Even if only a fourth of this target is realized, it will still significantly cut loan costs, which will in turn help reinvigorate the economy," noted Su.

Su said loans with low cost are important for financing infrastructure projects and will of course benefit the business world.

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