Dabei seit: 18. Nov 2021
Bank Indonesia to reduce liquidity in 2022, keep rates low until inflation rises
Indonesia's central bank plans to reduce the amount of excess liquidity in the banking system next year without disrupting lending, but will keep interest rates low until it sees signs of inflation rising, its governor said on Wednesday (Nov 24).
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This would reflect a shift in Bank Indonesia's (BI) monetary policy stance to "pro-stability" in 2022, from "pro-growth" currently, Perry Warjiyo said, adding that the bank's other policies will remain supportive of the economic recovery.
The reduction in excess liquidity would be BI's first move to unwind its ultra-loose policy, aimed at helping Southeast Asia's largest economy navigate the COVID-19 pandemic.
Warjiyo's remarks, made at an annual gathering with financial stakeholders, were in line with his earlier comments on 2022 policy tightening plans, even as BI downgraded its 2021 economic outlook after disappointing third-quarter growth.
"Excess liquidity in the banking system, which is currently very large, will be reduced gradually and cautiously so as not to interfere with the ability of banks in lending and purchasing of state securities to finance the state budget," he said.
"The policy of low interest rates ... will be maintained until there are early indications of rising inflation."
Annual inflation hit a five-month high of 1.66per cent in October but has remained below the central bank's 2 per cent to 4 per cent target range since mid-2020.