BI ready with new mechanism for money market stabilization

BI ready with new mechanism for money market stabilization

(ANTARA/Muhamad Nasrun)

Jakarta (ANTARA News) - Bank Indonesia (BI) has prepared a combination of dollar sales and purchase of state securities (SBN) in the secondary market to maintain financial market stability, a BI official said.

The central bank`s director of monetary research and policy, Perry Warjiyo, said here on Friday so far the mechanism was selling US dollars and buying SBI (Bank Indonesia Certificates) at a different time when the rupiah exchange rate and the price of government securities (SBN) were under pressure.

"With the new policy BI could act simultaneously namely selling US dollars while at the same time buying SBNs. This is a new mechanism and will be taken in case of pressure such as capital outflow," he said.

He said if a huge capital outflow occurs the new mechanism would be applied so that the exchange rate of the rupiah and the price of SBNs could be maintained.

"We have never done it before because so far the intensity of pressure has never been very big and could still be overcome using the old procedure," he said.

He said BI would apply the new mechanism based upon indicators such as how much investors withdraw their funds in shares, bonds and SBI and the drop in the price of SBN and shares and the development of liquidity in the money market and interest rates.

"We would monitor the indicators every day and weekly," he said.

In view of the current world economic situation Perry said BI would continue maintaining the stability of the rupiah exchange rate which tends to continue to appreciate.

"The rupiah is already stable. We will keep maintaining it as capital inflows have started to happen again through bonds although its volatility would tend to be high," he said.