7 September 2010
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The US Economy
US Plans Stimulus Spending On Transportation Infrastructure
US may announce a six-year plan to rehabilitate the nation’s transportation infrastructure withan initial allocation of US$50bn to help spur economic activities that are slowing down
. The USPresident will work with Congress to ensure that the plan is fully funded, and a significant portion of the newinvestments would be front-loaded in the first year to help create jobs starting in 2011. Construction jobs in theUS have declined by 940,000 since President Barack Obama took office in January 2009, even after a 19,000 gainin August. The US government plans to pay for it by eliminating tax deductions for oil and gas companies. Muchof the economic stimulus package of US$787bn approved in early 2009 has already been spent, according to theCongressional Budget Office. Of the total, US$223bn has gone to tax relief, about US$144bn has gone to statesto help prevent layoffs and provide health care and US$145bn has gone towards contracts, grants and loans. Of the amount of US$38.6bn allocated for the Transportation Department, only US$18.5bn has been paid out thus far.
Indonesia Raised Banks’ Reserve Ratio
, on 3 September,
ordered banks to increase their deposits with the central bank asprimary reserves to 8%
, from 5% previously, in a move to absorb 50 trillion rupiah (US$5.6bn) of excessliquidity from the system. The central bank, however, kept its benchmark interest rate unchanged at 6.5%. BankIndonesia indicated earlier that it may raise banks’ reserve requirement to absorb liquidity, while refraining fromraising its key policy rate, in a move to contain inflation. Indeed, the central bank has not changed its key policyrate after reducing it to 6.5% in May 2009. Meanwhile, the country’s inflation accelerated to a 16-month high of 6.4% yoy in August, higher than the central bank’s target of 4-6% for two consecutive months. The new primaryreserve level will take effect on 1 November, and beginning in March next year, the central bank will introduce anadditional reserve requirement that is linked to how much of its funds a lender gives out in loans. It will imposea penalty for banks whose loan-to-deposit ratio is below 78% or more than 100%. The additional reserverequirement for banks whose loan-to-deposit ratio is above 100% will be waived if those banks also have a capitaladequacy ratio of at least 14 percent. Currently, 30 banks have loan ratios below 78 percent and no banks areabove 100%.