Indonesia sells government bonds to absorb excess liquidity -official

JAKARTA, July 18 (Reuters) – Indonesia’s central bank has sold some of its government bond holdings in the secondary market, an official said on Monday, accelerating monetary policy normalization after keeping liquidity very slack for the pandemic.

Bank Indonesia (BI) is one of the world’s less hawkish central banks, having kept interest rates in Southeast Asia’s largest economy at record highs due to relatively low core inflation. weak.

However, it has started to tighten the liquidity of the financial system by making gradual increases in the reserve requirement ratio for banks from March to September. Read more

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“After raising the reserve requirement ratio… BI also strengthened rupee currency operations through the sale of government bonds in the secondary market,” Edi Susianto, head of BI’s monetary management department, told Reuters. in a text message.

The sale was also aimed at improving supply and demand conditions in the money market and the bond market, he said, adding that it was part of BI’s efforts to keep the rupee stable.

BI sold 390 billion rupees ($26.03 million) of bonds on Monday and would continue to sell, Edi said.

BI’s liquidity normalization efforts are underway as it continues to act as a stand-by buyer in government bond auctions, as part of its deal with fiscal policymakers to stabilize bond yields.

Last year it also agreed to buy Rs 224 trillion of low interest rate bonds in 2022 to help the government control its interest payments.

As of July 14, BI held a total of 824.54 trillion rupees ($55.04 billion) in government bonds, excluding those used in monetary transactions with banks, compared to 801.46 trillion. rupees at the end of 2021, according to data from the Ministry of Finance.

Central bank governor Perry Warjiyo assured markets that the net impact of BI operations this year would be a reduction in bank liquidity to a level that would not disrupt lending.

BI is due to hold a two-day policy meeting later this week. Warjiyo told Reuters on July 8 that BI may raise interest rates in the current quarter to contain future pressures on underlying inflation.

($1 = 14,982.0000 rupees)

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Reporting by Gayatri Suroyo Editing by Ed Davies and Kanupriya Kapoor

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