Get Ready, BI Boss Sends Signal The Fed Will Start Tapering At The End Of This Year

JAKARTA - The Governor of Bank Indonesia (BI) Perry Warjiyo said that the United States central bank (The Fed) would start making policy changes at the end of this year. According to him, the steps that must be observed are tightening liquidity in the financial market or what is commonly known as tapering.

He stated this in a Working Meeting with Commission XI of the DPR RI which was broadcast virtually today.

"There is a risk of a change in monetary policy in America, where they will most likely start tapering later this year," he said in a virtual channel, Monday, August 30.

Perry added, the assumption is based on the last statement of US central bank governor Jerome Powell recently.

"The last statement from the Fed, where Jerome Powell said he would start reducing liquidity," he said.

Meanwhile, Perry's intention to explain this is to provide an overview related to the stability of the rupiah exchange rate against foreign currencies, especially the US dollar.

"There are still risks over the Fed's planned monetary stimulus reduction policy and an increase in cases of the COVID-19 delta variant," he said.

However, the BI boss is optimistic that the dynamics that will occur in the future will not cause a big shock considering that the market is definitely watching the signs sent by the US central bank long before policy making.

"The understanding of the market is also getting better, and that's what we must anticipate in maintaining the rupiah exchange rate," he said.

To note, tapering or taper tantrum is a condition caused by the policy of the US central bank The Federal Reserve (Fed) which reduces the purchase of bonds or debt securities (US treasury). The step to reduce the purchase of debt securities itself is often referred to as quantitative easing (QE).

Meanwhile, the intention of the Fed to buy US treasury bonds is to provide a stimulus to the market through a splash of liquidity. The hope is that the US economy can be stretched because the amount of money circulating in the community becomes more. Thus, productive activities can run with an indication of the formation of inflation rates.