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Bank Indonesia Stands Firm: Pro-Stability Policy Shields Rupiah Amid Global Volatility
Amid a challenging global environment, Bank Indonesia reaffirms its commitment to a pro-stability monetary policy, using a mix of interest rates and market operations to defend the Rupiah's value.
Jakarta - Confronting a wave of global financial volatility, Bank Indonesia has taken a firm stance by holding its key policy rates steady. The central bank's decision is a strategic move to shield the domestic economy from external shocks, particularly the strengthening US dollar and capital flow uncertainty. This policy is part of a comprehensive strategy to maintain macroeconomic stability.
Governor Perry Warjiyo detailed that global uncertainty remains high, with financial markets adjusting to the prospect of prolonged high interest rates in developed nations. This condition has triggered capital outflows from emerging markets, including Indonesia, exerting significant depreciation pressure on the Rupiah exchange rate.
In response, BI is not merely passive. The institution is actively implementing triple intervention strategies in the spot domestic foreign exchange market, the Domestic Non-Deliverable Forward (DNDF) market, and the government bond (SBN) market. These actions aim to provide ample liquidity and manage excessive market volatility.
The core rationale for this firm stance is to control inflation through the exchange rate channel. A stable Rupiah is vital to prevent imported inflation from spiking, which would hurt consumers and disrupt economic planning. BI's measures are designed to break the cycle of currency weakness leading to broad price increases.
Simultaneously, BI continues to optimize its monetary operations to manage liquidity in the banking system, ensuring that short-term money market rates move within the interest rate corridor set by the policy rates. This provides clear guidance for financial market participants.
BI's policy is calibrated to support growth within a stable framework. By ensuring Rupiah stability, the central bank creates a conducive environment for investment and trade, which are the true engines of long-term economic expansion, rather than relying on short-term monetary stimulus.
The central bank also highlights the importance of policy synergy. Close coordination with the Fiscal Policy Authority is ongoing, particularly in managing inflation from the supply side and encouraging structural reforms to strengthen the external sector's resilience.
Ultimately, Bank Indonesia's unwavering stance sends a clear signal to the markets: preserving the value of the Rupiah and maintaining national economic stability are paramount, and the institution is equipped with the tools and determination to achieve these objectives.
(Hashim Zafran)
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