BI MULLING RAISE IN BANKS' RESERVES REQUIREMENT TO OFFSET INFLATION

Jakarta, July 11 (ANTARA) - Bank Indonesia (BI) will study the possibility of raising banks' minimum reserves requirement (GWM)in order to offset increasing inflation as a result of the upward trend in world crude prices, BI Governor Boediono said.

"We will take a look at adjustments in the context of all monetary instruments we have such as the BI rate, foreign exchange reserves and weekly auction. If need be, we will consider the GWM. We have many weapons so that we will adopt a good policy combination that will have a minimum negative impact and bring down the inflation rate," the central bank governor said.

Previously, BI had projected the inflation rate this year at 4 - 6 percent and at 3.5 - 5.5 percent in 2009. But until June, the year-on-year inflation rate has reached 11.03 percent.

The second amendment of Bank Indonesia's regulation on the Minimum Reserves Ratio Requirement for Public Banks stipulated that public bank's GWM is set at 5 percent plus 3 percent for those with a total DPK of between Rp10 trillion and Rp50 trillion, and plus 1 percent for banks with a DPK between Rp1 trillion and Rp10 trillion.

Banks with a DPK of lower than Rp1 trillion are only required to meet the 5 percent GMW requirement.

Data at BI show that until December 2007 the amount of GWM was Rp158.45 trillion and up to March 2008 it was recorded at Rp125.71 trillion.