Signs are emerging that Bank Indonesia could finally be starting to make some headway against soaring interest rates. Average rates bid for the central bank's one-month treasury bills, or SBIs, have fallen 100 basis points for each of the past two weeks. If this trend continues, Bank Indonesia managing director Miranda Goeltom said SBI rates could tumble 8 per cent over the next two months and base lending rates could follow. 'I think in two months from now we will see a big improvement,' she said. 'But there are, of course, pre-conditions for that to happen. 'There has to be no abrupt socio-political distortions, because if anything happens, of course you go back to zero again. 'Secondly, people have to behave rationally again. 'And thirdly, which is important, is people's expectations that we will sell dollars all the time.' The SBIs, which have been auctioned every Wednesday for the past six weeks to raise funds to cover the central bank's expenditure, are today widely seen as the best benchmark for lending rates, presently at about 70 per cent. When first launched, the bank was desperate for funds and it needed to soak up excess rupiah, having printed new notes abundantly, which contributed to soaring inflation. It was prepared to accept average SBI interest rate bids of 71 per cent for its one-month money-market paper. This week, it was accepting 68 per cent and only needed to settle for a 50 per cent take-up. Ms Goeltom said: 'In the first four or five auctions, people thought they could quote as high interest rates as they wanted, without realising that as the market widens and deepens, there will be more competitors and bidders.' The turnaround has been largely due to hard-currency foreign aid money starting to come into the country. The central bank is selling these dollars to raise rupiah on the government's behalf to subsidise basic goods. The policy is having a number of positive knock-on effects. Ms Goeltom said: 'By selling dollars not only are we giving some additional supply in the market. So according to the laws of supply and demand, the cost of dollars will go down. Also, we will be able to auction only a smaller amount of SBIs because some of the job of absorbing base money has been activated through selling dollars.' Interest rates cannot come down while inflation remains high, and inflation cannot come down until money supply shrinks, or so the central bank's theory goes. Ms Goeltom said: 'We have got a lot of pressure to reduce interest rates and yet we still can be firm enough in retaining our position, that it is important to keep tight monetary policy in the midst of inflationary pressure and social issue pressures. 'We are not targeting a high interest rate. We are targeting a stable rupiah, which means lowering inflationary pressures. 'By achieving our target base money, interest rates are coming down bit by bit, but there is no quick-fix.' Analysts are mostly sceptical. Jimmy Koh of Independent Economic Analysis said: 'In order to bring interest rates down, you have to bring down inflation. 'If you bring down commodity prices, there is a lower risk of social unrest. 'But despite an export ban on rice, people are still smuggling it out of the country like nobody's business. 'So I can't see how interest rates can come down.'