The Money Supply Drops To IDR 7,846 Trillion, Are The Effects Of The Rising BI Rate Starting To Feel?

Illustration. (Photo: Doc. Antara)

JAKARTA - Bank Indonesia (BI) reported that the total circulating in a broad sense (M2) in July 2022 was recorded at Rp. 7,846.5 trillion or grew 9.6 percent year on year (yoy) compared to July 2021.

Head of the BI Communications Department Erwin Haryono said the development was driven by growth in the money supply in the narrow sense of 14.9 percent and quasi money by 3.2 percent.

"M2 growth in July 2022 is mainly influenced by growth in credit distribution and developments in government finances, as well as net foreign assets," he said in an official statement on Wednesday, August 24.

According to Erwin, lending in July 2022 grew 10.5 percent after the previous month grew 10.4 percent.

Meanwhile, net bills to the central government contracted 11 percent after contracting 14 percent in June.

"On the other hand, net foreign assets contracted 4.6 percent in July 2022, after previously contracting 1.7 percent in June 2022," he said.

For information, liquidity conditions during the past month are known to have decreased from Rp7,888 trillion in June to Rp7,846 trillion in July.

This situation is in line with the central bank's move to accelerate the reduction of liquidity in the market in order to overcome the impact of inflation and the weakening of the rupiah exchange rate.

Recently, Bank Indonesia decided to raise the benchmark interest rate by 25 basis points to 3.75 percent. This is the first step taken by the monetary authority during the pandemic after previously setting the lowest BI rate policy in history at 3.50 percent.