The policy rate seems to be the last choice – Academia

Haryo Kuncoro (Jakarta Post)


Jakarta ●
Mon July 25, 2022

Bank Indonesia (BI) responded to analysts’ expectations by deciding last week to keep BI’s 7-day repo rate at 3.5%, deposit facility interest rate at 2.75 % and the loan facility at the level of 4.25%, which had been granted since February 2020.

A new development, however, has been BI’s recent sale of government securities (SBNs) in the secondary market. Although selling securities is a common practice for central banks in monetary operations, it was the first time for BI since the COVID-19 outbreak swept through the country in early March 2020. The burden sharing system obliges BI to buy SBN in the primary market to fund the state budget.

BI’s sale of SBN is also in line with macroprudential policies, as is its decision in May to raise the required reserve ratio (GWM) for banks to 9% in July and 12% from September to control liquidity. . .

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