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What BI watchers should know about Perry Warjiyo
Going forward, the more pressing priority for BI is how to improve monetary policy transmission in the real sector to spur the economy, generate jobs and cut down poverty levels.
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Bank Indonesia has its headquarters on Jl. MH Thamrin in Central Jakarta. (JP/Wienda Parwitasari)
O
n July 15, 2013, I opened my cell phone to text Bank Indonesia (BI) Deputy Governor Perry Warjiyo. I was a journalist covering the central bank and that morning, the rupiah had weakened to Rp 10,024 per US dollar. It was the first time in four years that the rupiah rate onshore was quoted in five digits, after it had hovered at around Rp 9,900 per dollar for weeks, supported by heavy intervention from the central bank.
In fact, BI had burned US$7 billion of foreign exchange reserves the previous month as it tried to prevent the rupiah from breaching the Rp 10,000 per dollar psychological threshold.
In his reply, Perry commented that the central bank decided to float the exchange rate to stabilize the economy. But it was his next explanation that might have defined his viewpoint on monetary policy: he expected the rising trend of interest rates would stop under his watch (at the time, the BI rate had just been jacked up by 75 basis points in two months).
“Going forward, the BI rate has the possibility of going down, not up, if inflation returns to its normal path in September,” he wrote to me in a text message back then.
Inflation did indeed return to its normal path in September, but the lower benchmark BI rate that Perry envisioned did not materialize. Clearly, Perry’s low interestrate policy stance was opposed by BI Governor Agus Martowardojo, who would hike interest rates aggressively from 6.5 percent to 7.75 percent within a year.
Agus’s policy stance promotes financial system stability, and he has since won acclaim from international fund managers. However, domestic businesspeople and the real sector are still feeling the pinch of the move, which was once described by Bisnis Indonesia daily as an “overdose” of monetary policy tightening. Lending rates skyrocketed and remain high today, despite BI trying to turn the situation around by actively loosening monetary policy.
Soon, however, Perry would have the opportunity and full authority to promote his low interest-rate and growth-oriented agenda. To the market’s surprise, he became the sole candidate President Joko “Jokowi” Widodo proposed as BI governor for the 2018-2023 term to replace the incumbent, Agus.
