BI Anticipates Capital Outside of FOMC Meeting

By : Herry Barus And Aldo Bella Putra | Monday, May 28 2018 - 15:30 IWST

Perry Warjiyo Gubernur Bank Indonesia (Foto Dok Industry.co.id)

INDUSTRY.co.id - Jakarta - Bank Indonesia said it is continuing to increase monitoring and mitigation of potential foreign capital outflows that could undermine the rupiah exchange rate, especially ahead of the US Federal Open Market Committee (FOMC) meeting on June 14, 2018.

Therefore, the Central Bank will determine policies to stabilize financial markets, including controlling the rupiah exchange rate and also anticipatory pressure during 2018, at an extra Board of Governors (RDG) meeting on May 30, 2018.

"Because we want to respond quickly, the Board of Governors Meeting can be added as well as the 'pre-emptive' (FOI) step for the FOMC on June 14th," said BI Governor Perry Warjiyo in a press conference here on Monday 5/28/2018)

The extra RDG was held before the Federal Reserve's FOMC meeting, and just two weeks after BI raised its benchmark interest rate by 25 basis points on May 17, 2018.

The global financial market, Perry said, is expected to raise its benchmark interest rate by 3-4 times this year, including the second in June 2018.

Thus, Perry sees pressure exit foreign capital flows that could reduce the exchange rate, will still overshadow the domestic financial market. Exit capital pressure also came from improved US economic data and the expansive US fiscal policy that raised 10-year Treasury Bill bond yields.

Perry, newly inaugurated on May 24, 2018, has repeatedly made his pledge to apply pre-emptive monetary policy and to advance ahead of the curve.

"Our short-term focus through monetary policy is for exchange rate stability," he said.

Perry also in the near future will spawn macro prudential policy through relaxation of Home Ownership Credit to encourage economic growth. This year, BI sees domestic economic growth reaching 5.2 percent (YoY).

On the same occasion, Finance Minister Sri Mulyani Indrawati affirmed that the government and Bank Indonesia, along with other members of the Financial System Stability Committee (KSSK) are ready to implement firm policies to anticipate external pressures that could disrupt economic stability.

MoF also coordinates with BI in the Government Securities (SBN) market to keep the bond yield movement rational.

"All components of KSSK will continue to increase alertness and we will not hesitate to take action," he said