STATEMENT OF THE BOARD OF GOVERNORS OF BANK INDONESIA : BI Shall Continue The Tight Bias Monetary Policy: BI Rate at 12,75% - Bank Sentral Republik Indonesia
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October 31, 2020

The Meeting of the Board of Governors (RDG) of Bank Indonesia held today on February 7, 2006 decided to continue the tight bias monetary policy to control the inflation rate for the medium and long term period and to maintain a continuous momentum of economic growth. Therefore, RDG Bank Indonesia has decided to keep BI rate at the level of 12,75%.

In the meeting that evaluated the economic development in January 2006, the Board of Governors considered the macro economic stability has been relatively maintained as reflected in the controlled rate of IHK inflation, a stronger exchange rate, a stable monetary capacity, and a quite satisfactory performance of banking. This condition is similar with the prediction of Bank Indonesia made at the beginning of the year.

While maintaining their optimism of the economic prospect, the Board of Governors still underlined several risk factors worthy of noting, whether internally or externally, which are capable of obstructing the economic growth and possible to create disturbance on the macro-economic stability. Internally, the Board of Governors has noticed several potentially disturbing factors caused by a quite big liquidity excess in the money market, banking non performing loan (NPL) rate which is relatively high, banking undisbursed loan level which is quite high, and plan for a raise of several administered prices whose amount and time of raise have not been determined. Externally, the still high and fluctuating prices of world's oil become a considerable factor.

Moreover, in order to support a continuous growth, the Board of Governors has identified the needs to continuously orientate Indonesian economy in the long run, both in real sector and financial sector. In the real sector, the effort to improve fundamental factors such as investment situation, tax and others should be considered to be carried out by various parties. In banking sector, the effort to improve intermediation function should not be executed only by the monetary authority, but must be supported by various parties. Regarding this, Bank Indonesia and the Government will coordinate their policies in order to support the efforts to create a more conducive situation and give assurance to the business world.

Jakarta, February 7, 2006
Halim Alamsyah



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