Bank Indonesia strengthened monetary operations by introducing a new policy rate known as the BI 7-Day (Reverse) Repo Rate, effective from 19th August 2016. In addition to the existing BI Rate, the new policy rate does not represent a change of monetary policy stance.
Why did Bank Indonesia introduce a new reference rate? In order to accelerate the transmission of the policy rate to the money market, banking industry and real sector. The new BI 7-Day (Reverse) Repo Rate has a stronger correlation with money market rates, is transactional or tradeable on the market and increases financial market deepening.
During the transition period, the BI Rate will still be announced as the reference rate alongside the BI 7-Day (Reverse) Repo Rate.
Strengthening monetary operations has become commonplace among central banks and is considered an international best practice when implementing monetary operations. Monetary operations are always honed to boost policy effectiveness, especially in terms of maintaining price stability.
Monetary operations were also refined considering the recent conducive macroeconomic conditions, which provided impetus to efforts to strengthen monetary operations.