Indonesia central bank governor says new BI mandate does not affect policy

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Indonesia central bank governor says new BI mandate does not affect policy

JAKARTA Indonesia's central bank governor Perry Warjiyo said on Thursday that a law last year that expanded Bank Indonesia's BI mandate would not affect its framework to tackle inflation was passed by the central bank governor Perry Warjiyo.

In December, the parliament passed a bill that widened BI's mission to include maintaining financial system stability to support sustainable economic growth, as well as the goal of keeping the rupiah currency stable, which includes curbing inflation.

There are concerns that the new law could disrupt BI's autonomy, although government officials have repeatedly pledged that the central bank would remain independent.

We have been doing this for a long time. Now we are grateful that the new law acknowledges that legally, Warjiyo said, referring to efforts to maintain financial and payment system stability through macroprudential and digital payment policies.

He said that we still do the inflation targeting framework.

Warjiyo made comments at the bank's annual investment forum, some of his first in public on BI's wider mandate.

BI's policy mix would take into account many aspects, including economic growth, which the central bank has done since 2010, according to Warjiyo.

Before the passage of the law, BI typically set an inflation target range for each year and decided on a mix of policy to hit the target, while maintaining financial system stability.

Since August, BI has raised its benchmark interest rate by 225 basis points to curb inflation that has been above its target range.

The rate hikes were enough to guide inflation back to within the 2 per cent to 4 per cent target range in the second half of 2023, according to Warjiyo. The December inflation rate was 5.51 per cent.

The GDP growth outlook for 2023 was the lowest point of 4.5 per cent to 5.3 per cent, down from 2022's growth estimate of 5.1 per cent to 5.2 per cent, he said.