LPS CUTS RATE BY 25 BASIS POINTS

Jakarta, June 11 (ANTARA) - The Deposit Insurance Agency (LPS) has decided to cut again its insurance interest rate by 25 basis points for the period of June 15 to September 14, 2009.

"We decided to cut the rate because of the current economic developments," the LPS executive chief Firdaus Djaelani said here on Thursday.

The LPS rate for general banks is set at 7.5 percent for rupiah deposits and 2.75 percent for deposits in foreign currencies and 11 percent for micro-credit banks.

He said the decision to cut the rate was based upon conditions such as the drop in stages of bank deposit interest, the relatively low inflation tendency, the decline in the BI key interest rate and increasing liquidity of banks.

He said the width between insurance and key rates was now only 50 basis points (0.5 percent) with the BI rate standing at 7.0 percent. In the future he hoped it would be shorter, he said.

"In the future it could go there. Now it is still 50 basis points. Indeed ours is still quite high to cover wider customers," he said.

Economic observer Tony Prasetyantono meanwhile said that the decision was in line with the monetary policy on BI Rate which continued to be cut.

"The movement in the BI Rate and the LPS Rate must be parallel in order to give certainty regarding future monetary policy for reference in determining business plans by banks and the real sector.

The central bank (BI) early this month cut its key rate by 25 basis points to seven percent.