Bank Indonesia to bolster policy mix to deal with economic integration
BANK INDONESIA will continue to strengthen the mix of its monetary, macroprudential and payment system policies and the circulation of rupiah to maintain Indonesia's macroeconomic stability, which will eventually contribute to the strengthening of the sta
BI governor Agus Martowardojo said such an effort was required to strengthen Indonesia’s resilience and boost its economic competitiveness in the era of economic integration.
Agus said that in terms of monetary policy, the central bank had been consistent and remained cautious in making policies, which should be in line with its inflation target and could control the current account deficit to a level that was healthy and supportive to overall economic stability.
“With this framework, Indonesia’s monetary policy stance could be directed well so that economic activities can move in line with economic capacity and will not cause higher inflationary pressures and an increase in the current account deficit,” he said in the Bank Indonesia Annual Meeting 2015 in Jakarta on Tuesday.
Agus recognised that the current inflation pressures and account deficit had begun to decline. However, he added that Indonesia should still remain vigilant against external conditions that could potentially destabilise the national economy.
“Including the potential risks that could be triggered by global uncertainty caused by interest rates of the US’ Federal Reserve,” he said.
To increase the resilience of the market, the central bank would also continue its various work programmes in order to encourage the foreign exchange market and the money market in Indonesia to become more liquid, in addition to the bank’s effort to encourage the development of derivative instruments for hedging purposes.
“To enhance the role of financial markets as a source of medium-term economic funding, BI will strengthen coordination with the Finance Ministry while the Financial Services Authority will establish development financing through a financial markets coordination forum,” he said.
In terms of macroprudential policy, the central bank would continue to maintain the stability of the financial system. One of these was to strengthen the macroprudential authority of the Financial Services Authority by accommodating it in the amendment of the law on Bank Indonesia.
“We consider it necessary to ensure the implementation of effective macroprudential oversight functions in the financial sector,” he said.
In terms of payment systems and the management of the rupiah, BI policies would be directed to strengthen the payment system so that it could run more safely, smoothly and efficiently.
The rapid use of technology-based payment instruments such as credit and debit cards, electronic money and digital technologies such as Internet banking and mobile payment needed to be anticipated in terms of their security and efficiency.
