JAKARTA: Bank Indonesia will absorb excessive short-term liquidity in the market to curb inflation rate that may accelerate on the plan to raise subsidized fuel prices.
The central bank will conduct an open market operation to absorb excessive liquidity, said Deputy Governor Hartadi A. Sarwono.
“We will conduct a regular open market but there’s a tendency to be stricter in short term because we will absorb more short-term instruments,” he said on Monday.
Interest rates of the central bank’s short-term instruments, including Bank Indonesia deposit facility and time deposit, may rise due to the plan.
Liquidity management is one of the central bank’s macro policies to face pressure of inflation rate from higher fuel prices. Others include interest rate policy and maintaining exchange rate stability.
The central bank can use monetary instruments or increase the minimum reserve requirement to absorb excessive liquidity.
However, the bank would not opt to change the policy on minimum reserve requirement in the near future, Hartadi said.
Bank Indonesia would continue taking measures in facing inflation pressure to ease investors and market traders’ anxiety, Hartadi said. The main indicator is rupiah exchange rate, he said.
“The weakening of Indonesia’s rupiah is actually in line with regional currencies due to global condition. However, the pressure against Indonesia is bigger due to uncertainty in subsidized fuel prices,” he said.
Inefficient banks
At the same event, Bank Indonesia has warned banks with operating expenditure to operating income ratio of above 90%, which shows inefficiency, said Deputy Governor Halim Alamsyah.
According to central bank data, state-controlled banks have the largest operating expenditure to operating income (BOPO) ratio, which reached 91.94% at end last year, as compared with an industry average of 85.42%. Rural banks had the lowest ratio at 79.14%.
Foreign exchange commercial banks had the ratio at 80.47% and non-foreign exchange commercial banks at 83.91%. Meanwhile, mixed banks’ ratio was at 85.99% and foreign banks at 83.24%. (T04/NOM)
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