Indonesia tackling dysfunctional money markets
Analysts say the process will be long, central bank needs to become more effective in signalling, and the markets require more tools and products
Jakarta
INDONESIA'S central bank has taken a first step to fix the country's dysfunctional and often volatile short-term money markets - but the journey will be long.
Frustrated by futile attempts to push down the high cost of funds, Bank Indonesia (BI) is shifting in August to a seven-day operating rate as its policy rate, abandoning the current 12-month reference one.
The present policy rate is 6.75 per cent. At the last auction for one-week reverse repo contracts, BI offered 5.50 per cent.
Bankers say the benchmark switch will help BI influence rates, which its recent easing moves - including cutting the policy rate by 75 basis points this year - have failed …
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