BI to shift monetary policy to IT system<\/p>\n
JAKARTA (JP): Bank Indonesia gradually plans to shift its
\ncurrent multitarget monetary policy to a single inflation target
\npolicy, according to central bank deputy governor Achjar Iljas.<\/p>\n
Achjar said on Friday Indonesia needed another three years
\nbefore its central bank could fully implement the so-called
\ninflation targeting (IT) system.<\/p>\n
\"Indonesia needs another two to three years to implement the
\nIT system. We still have a lot of homework to do,\" he told
\njournalists following the closing of a two-day international
\nseminar on inflation targeting sponsored by the International
\nMonetary Fund.<\/p>\n
Bank Indonesia's current multitarget monetary policy focuses
\non the exchange rate and price stability. Achjar said with the IT
\nsystem, the central bank's single objective would be price
\nstability, while exchange rate fluctuations would only be
\naddressed if they were perceived as a threat to its inflation
\ntarget.<\/p>\n
\"But based on the experience of other nations, there's a
\ncorrelation between the adoption of the IT system and exchange
\nrate stability in the long run,\" he said.<\/p>\n
Achjar said a precondition for implementing the IT system was
\na credible independent central bank which could not be forced to
\nplug the government's fiscal deficit.<\/p>\n
He said Law No. 23\/1999 on the independence of Bank Indonesia
\nprovided the legitimacy for the adoption of the IT system as the
\ncentral bank's monetary policy framework.<\/p>\n
But Achjar said that in the case of Indonesia, there were
\nseveral issues which still had to be settled, particularly the
\npolitical will and commitment of the government, the legislature
\nand the public.<\/p>\n
\"Looking forward, we (Bank Indonesia) have to move from a
\nlegal independency to an actual (operational) independency,\" he
\nsaid.<\/p>\n
Other issues which also must first be addressed, according to
\nAchjar, include the weak banking system, high fiscal deficit,
\nslow progress in resolving the country's overseas debts, the
\nvolatility of the rupiah and weak coordination between the
\ngovernment and the central bank in achieving inflation targets.<\/p>\n
\"But so far, the experience of other countries which have
\nadopted the IT system shows quite a high degree of success in
\nachieving price stability,\" he said.<\/p>\n
The IT system was first developed by New Zealand in 1990. This
\nmonetary policy framework has now been adopted by a number of
\ndeveloped and developing nations, including England, Canada,
\nAustralia, Spain, Sweden, Finland, Israel, Brazil, Chile, South
\nAfrica, Poland, South Korea and Thailand.<\/p>\n
The two-day seminar was attended by domestic and foreign
\nexperts, including representatives of foreign central banks and
\ninstitutions.<\/p>\n
Achjar said Bank Indonesia had begun taking steps toward the
\nimplementation of the IT system, including the regular
\npublication of its monetary targets and the results of its board
\nof governors meetings. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-to-shift-monetary-policy-to-it-system-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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