Banks may face liquidity squeeze: BI

Jakarta

THE governor of Indonesia's central bank said on Friday there should be room to loosen monetary policy further, but cautioned that lenders might face a near-term liquidity squeeze due to increased government bond issues.

On Thursday, Bank Indonesia (BI) cut its benchmark interest rate for the first time in 11 months by 25 basis points to 7.25 per cent. The bank has previously reduced commercial lenders' reserve requirements and relaxed some lending rules in order to lift up sagging economic growth.