Bank Indonesia Clarifies Monetary Policy Stance

Balancing Contractionary and Expansionary Measures

Bank Indonesia (BI) has addressed concerns about its monetary policy stance, emphasizing that its current approach combines both contractionary and expansionary elements. Senior Deputy Governor Destry Damayanti explained that while BI continues to use liquidity absorption instruments like Sekuritas Rupiah Bank Indonesia (SRBI), it is simultaneously implementing significant liquidity expansion measures.

Dual Approach to Monetary Policy

Destry clarified that SRBI is part of BI's monetary operations toolkit that can serve both contractionary and expansionary purposes depending on market conditions. When market liquidity is high, funds naturally flow back to BI through instruments like SRBI. However, the central bank is also actively engaging in expansionary measures such as purchasing government bonds (SBN), conducting foreign exchange swaps, and repo transactions to inject liquidity into the system.

Context and Market Implications

This clarification comes in response to Finance Minister Purbaya Yudhi Sadewa's recent suggestion that BI should reduce its liquidity absorption efforts to accelerate economic recovery. The dual approach adopted by BI reflects its balanced strategy to maintain financial system stability while supporting economic growth. The central bank's ability to deploy both contractionary and expansionary measures allows it to respond effectively to changing market conditions and economic needs.