Bank Indonesia’s Latest Policy Direction Amid the World Crisis

Bank Indonesia

The threat of global darkness in the form of a recession haunts the entire world, including Indonesia. However, the Financial System Stability Committee (KSSK) emphasized that the central bank’s policy direction remains the same.

Perry Warjiyo, Member of the KSSK and Governor of Bank Indonesia (BI) said that the central bank’s policy direction in the future remains the same, namely maintaining stability amid the dynamics of the global economy.

“Monetary policy is to maintain economic stability, pro-stability, including buffering shocks from the impact of global uncertainty,” Perry said at a press conference, Thursday (11/3/2022).

Perry emphasized that the central bank will continue to use other policy instruments, such as digitalization, financial market deepening, and financial inclusion aimed at recovering the national economy.

“In line with this policy since August 2022, BI has raised the BI 7 Days Reverse Repo Rate by 125 bps to 4.75%,” he explained.

BI emphasized that the decision to raise the benchmark interest rate first was not without reason. Perry said this was done to lower inflation expectations, which are expected to be higher due to the increase in fuel prices.

“This decision is also to strengthen exchange rate stability so that it is in line with its fundamental value amidst the strengthening US$ and high uncertainty in global financial markets,” he said.

Furthermore, KSSK announced that the condition of the Indonesian financial system in the third quarter of 2022 was also maintained and remained resilient.

This conclusion was reached after a meeting was held between the government through the Ministry of Finance, Bank Indonesia, the Financial Services Authority (OJK), and the Deposit Insurance Corporation (LPS).

“The stability of the financial system or SSK in the third quarter of 2022 will remain in a state of resilience,” said Sri Mulyani, Minister of Finance at a press conference, Thursday (11/3/2022).

“The four of us are committed to maintaining financial system stability by strengthening coordination and continuing to be aware of developments from global risks, including preparing policy responses,” he explained.