Shhh! BI Boss Gives Leaks How Long The Trend Of Low Interest Rates Will Last

Governor of Bank Indonesia Perry Warjiyo (Photo: Doc. Antara)

JAKARTA - Bank Indonesia (BI) Governor Perry Warjiyo said his party would continue to implement accommodative macroprudential policies to withstand pressures caused by the COVID-19 pandemic in the financial sector.

According to him, this then has implications for the application of the benchmark interest rate set by the central bank. In addition, BI is also trying to keep liquidity in the market loose while paying attention to signs of economic recovery shown by the amount of inflation formed.

"Interest rates will remain low until we see signs of rising inflation, the earliest of which will occur early next year," he said in an online press conference, Thursday, June 17.

To note, the benchmark interest rate set by the monetary authority is currently recorded at the level of 3.50 percent. This figure is the lowest interest rate in the history of BI.

Furthermore, Perry explained that setting interest rates cannot be separated from global influences, especially the policies of the United States (US) central bank, namely The Federal Reserve aka The Fed.

"Global influence of course comes from the US Treasury (US debt securities) where the Fed stated that tapering (tightening liquidity) is still too early for now," he said.

Perry added that the US central bank also signaled that it would still implement accommodative measures to balance the financial system and their domestic economy.

“As far as we understand, the Fed Funds Rate (US interest rate) will only increase in 2023, and the impact on the US Treasury is still far away. I think the market has understood this condition,” he said.

According to Perry, Bank Indonesia will raise its benchmark interest rate after taking several strategic steps as a policy signal to the market.

“BI will start with tapering first, that is, we will reduce liquidity. After that, the next steps will be followed by the decision to adjust the interest rate, “concluded Perry.