Why Mr. Boediono didn't lower the BI Rates

[back to our main discussion ^_^] some of you may have aware how Mr. Boediono [the Indonesian Central Bank Governor] has decide to raise BI Rate. Yet no one in the news i read give any compliment about this policy, many criticize how the rate will crush the expansion of Indonesian economics.

Since banks play a major role in indonesian economics, most company got their finance from banks, rather than issuing obligation or stocks. The rate hikes will make bank liquidity source become more expensive, and this will cause banks to increase their lending rate also, while the lending rates increase will mean heavier burden for company, in significant way, company will forced to do lay off to spend less money in HR.

looking at the bright side, may be, just may be Mr. Boediono have some concern that in fact, Indonesian economics are build majorly on top of foreign investment, that making the foreign investment come to our economy is important. And with the rates cut in other countries Indonesia will gain from incoming investment. And also, Indonesian banks have problems with their expansion volume also. Note that these years (2007-2008) Indonesian banks book a massive around 20-30% of Lending Growth, this in my opinion will lead to less prudent banking practice [this is also the roots of current US crisis].

so, how the thing will go on is something beyond our reach this time, i have confidence on Mr Boediono personality, personally, i hope he and government as a whole make a right troubleshooting policy for this bumpy moment.

well, for you [and me] my fellow analyst, maybe it is time to include pessimistic scenario in your analysis, just for protection, your own protection [serious mode : ON]. good night and take care.