The revision of the BI Rate was aimed at keeping inflation expectations in check and minimizing the impact of the rupiah`s depreciation on inflation and vice versa.Jakarta (ANTARA News) - Bank Indonesia increased its reference rate by 50 basis points (bps), from 6.5 percent to 7 percent, on Thursday.
"It was agreed during a meeting of the board of governors today that the economic policy package must be further strengthened. Therefore, they decided to raise the central bank`s rate by 50 bps to 7.0 percent, lending facility rate by 25 bps to 7.0 percent, and deposit facility rate by 50 bps to 5.25 percent," said Difi A Johansyah, the central bank`s executive director of communication, at a press conference.
He stated that the revision of the BI Rate was aimed at keeping inflation expectations in check and minimizing the impact of the rupiah`s depreciation on inflation and vice versa.
"This move is also part of efforts to reduce the current account deficit for the sake of a healthier and more sustainable economy," Johansyah explained.
In addition to raising the reference rate, he continued, the central bank would also reduce the holding period of Bank Indonesia Certificate from six months to one month.
Johansyah pointed out that the bank would from here on consider the Bank Indonesia Deposit Certificate (SDBI) as a part of its secondary reserve requirement and boost cooperation between central banks by expanding the bilateral swap agreement between Bank Indonesia and Bank of Japan.
Difi expressed hope that the central bank`s measure would further strengthen the recently issued economic policy package that has includes, among other things, overnight foreign exchange and SDBI auction, extension of foreign exchange swap as a hedging instrument and loan-to-value ratio for property credits, and supervisory action in the management of liquidity and credit distribution. (*)
Editor: Heru Purwanto
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