Unej Observer: BI Policy Functions Remain Intact After Perry's Resignation

An economist from the University of Jember (Unej), Adhitya Wardhono, PhD, stated that Bank Indonesia’s (BI) policy functions will continue to operate following the resignation of Governor Perry Warjiyo, as the institution possesses a collective-collegial decision-making system and a clear succession mechanism. “The appointment of the Senior Deputy Governor as Acting Governor ensures there is no vacuum in leadership or policy-making authority,” he said in Jember Regency, East Java, on Monday. According to him, the experience of Destry Damayanti in Bank Indonesia and the financial markets also provides a safe space, so it is expected to maintain policy continuity, particularly in controlling inflation and stabilising the rupiah exchange rate. He said the resignation of the Bank Indonesia Governor could trigger market reactions given the strategic nature of the position, but the impact is likely to be greater on short-term sentiment rather than on economic fundamentals. In the short term, the market will respond, which will be reflected in the exchange rate and the stock market, and it will also affect the government bond market. However, market movements in the first one or two days should not be immediately concluded as a fundamental change in the economy. Initial market reactions are often a process of adjusting to new information. “The market essentially pays more attention to policy consistency than to a change of figure. As long as monetary policy remains measured and communication is clear, market confidence can be maintained,” he explained. He explained that a greater impact could potentially arise if the transition process causes prolonged uncertainty or creates a perception of compromised Bank Indonesia independence. “I see this issue in three layers. First, whether the institutional mechanism continues to function. Second, whether the direction of monetary policy remains consistent. Third, how the market forms its expectations,” he said. Adhitya stated that so far the legal mechanism is functioning and there is no leadership vacuum, so there is no need to build excessive speculation, but it remains necessary to observe market responses such as the exchange rate, capital flows, the bond market, and inflation expectations. Adhitya, who is also a monetary economics expert, said that market reactions also need to be analysed proportionally because their movements are not only influenced by the change of the BI Governor, but also by many other factors including the prevailing global geopolitical conditions. “The most important thing is institutional credibility. Economic literature shows that central bank independence, clear communication, and consistency between statements and policy actions are crucial in maintaining inflation expectations and market confidence,” he said.