Bank Indonesia (BI) continues to look for the right formula to deal with growing uncertainty in the financial sector. Curbing the impact of a further increase in the United States interest rate will be the nearest test.

To further maintain market stability, for example, BI launched a new benchmark interest rate for the country’s overnight interbank money market rate on Aug.1 to improve the reliability of its reference rate.

The new interest reference rate is called the Indonesia Overnight Index Average (IndONIA), which will eventually replace the overnight Jakarta Interbank Offered Rate (JIBOR) as the base interest rate in the Interbank Money Market (PUAB). JIBOR will be used until the new benchmark rate is fully enforced in January, 2019.

The system in determining the IndONIA rate is still based on the JIBOR overnight rate, but its mech...

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