JAKARTA (TheInsiderStories) – Governor of Bank Indonesia (BI), Perry Warjiyo revealed, the central bank has conduct quantitative easing (QE) up to Rp583.8 trillion (US$38.92 billion) during COVID-19 pandemic. The central bank has bought around Rp22 trillion of state bonds from the primary market and in the secondary market with worth of Rp166.2 trillion, while statutory reserves amounted to Rp155 trillion.
“This is a form of BI’ commitment to support and ensure fiscal financing by the government through the primary market. Especially in terms of insufficient market capacity. The numbers will move dynamically from time to time,” he told reporters via video conference on Tuesday (05/19).
Followed the monetary policy actions, said Warjiyo, the condition of banking liquidity remains adequate and supports the continued to decline the interest rates. Adequate banking liquidity is reflected in the average daily volume of the interbank market in April, which remained high at Rp9.2 trillion and the liquidity ratio of the Third Party Funds at 24.16 percent in March.
This development had a positive impact on interest rate reduction. In April, the average interbank rate and the one-week JIBOR tenor moved stable around the BI-7DRR level of 4.31 percent and 4.60 percent, respectively. The weighted average of deposit and credit interest rates were recorded at 5.92 percent and 10.17 percent or down 11 basis points and 19 basis points each from the March level.
Warjiyo noted, this development was influenced by BI’ strategy in maintaining the adequate liquidity. The decline in interest rates has an impact on the increase in the growth of M1 and M2 monetary quantities in March.
In February, Warjiyo urges the nation banks to immediately adjust their deposit and loan rates with the central bank’ benchmark interest rate that has been slashed fifth times to 4.50 percent and the primary reserve replacement ratio by 1 percent.
Last year, he noted, the credit growth was quite contracted because it was only able to grow 8 percent, far below the initial target of 10 to 12 percent. The bank has trimmed reserve requirement ratio by 50 basis points to 5.50 percent for conventional banks and 4.0 percent for Islamic in November 2019.
“The money market deepening policy will also be strengthened to support the effectiveness of accommodative monetary and macro-prudential policies,” said Warjiyo.
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