BI: Market Not to Be Aggressive to SBI Decrease
Wednesday, 14 February, 2007 | 14:40 WIB

TEMPO Interactive, Jakarta: Bank Indonesia (BI) has asked market not to be aggressive in responding to the decrease in three-month Bank Indonesia Certificates (SBI) to the level of 8.1 percent.

The reason for this was that, according to Budi Mulia, Director of Strategic Planning and Mass Relations of Bank Indonesia, the three-monthly SBIs were not one of the central bank’s monetary instruments.

“The policy instruments of Bank Indonesia remains the BI Rate and one-monthly SBIs,” he said when contacted by Tempo in Jakarta.

Budi explained that the decrease was made solely based on the auction process of the SBIs that had fallen due.

The decrease did not correlate with the BI Rate or even with future interest cuts.

“There are no another indications,” he said.

In the SBI auction on February 7, the interest rate on three-month SBIs dropped from 9 percent to 8.1 percent and the one-month SBI rate fell to 9.25 percent from the previous 9.5 percent.

According to him, the three-month SBI interest rate reflected the low auction offers of three-month SBIs.

Of the matured three-month SBIs valued at Rp19 trillion, the received offers were only Rp9 trillion.

However, BI only absorbed Rp1 trillion.

In fact, he added, the three-month SBIs will be removed.

The reason was that BI is attempting to issue a monetary policy referring to the BI Rate and is preparing six- to nine-month SBIs.

“It was a kind of affirmation as well as a signal to the market regarding BI’s monetary policies,” he said.

Banking observer Mirza Adityaswara told Tempo that the impact of the decrease in three-month SBIs to 8.1 percent against market expectations must be seriously watched.

Anton Aprianto