Perry Wardijo pledges “we will preempt and be ahead of the curve”

Jakarta (ANTARA News) – The new Governor of Bank Indonesia Perry Warjiyo pledged to adopt stronger monetary policy to stabilize the national currency through benchmark interest rate and market intervention.

“I will give priority to monetary policy to create stability of rupiah exchange rate with a combined policies in exchange rate and double intervention,” he said in his first statement after he was installed new Governor the Central Bank here on Thursday.

Warjiyo was installed new Governor of the Central Bank for the 2018-2023 term replacing retiring Agus Martowardojo.

Wardijo, who has been aggressive in campaigning for monetary policy of pro growth and pro stability, said the monetary policy instrument will be fully used to maintain economic stability.

Monetary instrument will be used mainly to face pressure that comes as a result of normalization of the U.S. monetary policy and continued rise in the yield of the US state bonds, US Treasury bill that draws foreign capital from Indonesia, he said.

However, Bank Indonesia will not ignore the potential to accelerate economic growth such as through macro-prudential policy.

“Bank Indonesia still has four other instruments to keep the push for economic growth,” Perry said.

He pledged to adopt a preemptive and ahead of the curve monetary policy to respond the global economic dynamic shadowed by uncertainties .

“The exchange rate now is already overshot. We will preempt and will be ahead of the curve in interest rate policy prescription, and then we will launch double intervention to stabilize the exchange rate and buy state securities from the market,” he added.

The Central Bank has spent Rp50 trillion to buy back state securities (SBN) since early this year including Rp13 trillion in May to cope with the turbulence in the SBN market as a result of the rise in the yield of the U.S. state bonds.

Wardijo will soon summon banks, which are active in foreign exchange management to soothe and socialize monetary policy.

“I will strengthen coordination with the Financial Service Authority (OJK). I will also active in communications with banks such as to straighten out many wrong perceptions,” he said.

The Central Bank 7-Day Reverse Repo Rate is now 4.5 percent rising 25 basis points earlier this month after the Central Bank maintained the rate at 4.25 percent for nine months.

Meanwhile Finance Minister Sri Mulyani said she is waiting for a breakthrough to be taken by the new Central Bank leader mainly in the effort to stabilize the economy.

“We hope the new governor could give a better contribution to the national economic and financial system stability. We are awaiting a breakthrough,” Mulyani said after the installation.

She said currently the country needs an accurate monetary policy to respond the turbulence in exchange rate to produce a positive sentiment.

“Perry is believed to be able to do that to minimize the negative impact of the US interest rate policy,” she said.

The minister said Warjiyo is a credible person and could play a leadership that would calm the market players down, adding she is ready to cooperate with Perry.

“I would be ready to cooperate fully. Bank Indonesia and the government would continue to responsive to any condition and immediately make adjustment,” she said.

Source: ANTARA News