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Jakarta (ANTARA News) - Bank Indonesia (BI) has raised banks` primary reserve requirement from five to eight percent of third party funds as of November 2010 to overcome high inflationary pressure in December.

"We actually see that inflation in October, November is not too (high) but in December it may rise again," the central bank governor, Darmin Nasution, said here on Friday.

He said the new reserve requirement (GWM) regulation was issued so that BI Rate would not become the only instrument for controlling inflation.

"We did not say we changed it but we said that we could not only use BI Rate but also GWM as an instrument to control inflation," he said.

Darmin said the GWM instrument for controlling inflation indeed had not been used much in the world but in Asia it had been practiced a lot.

He said BI also had inflation control teams in provinces and regions that helped inflation control efforts. "We certainly will also use them. This will not be dealt with using one or two policies," he said.

He said the inclusion of GWM for controlling inflation was needed as the patterns of inflation movement are not always the same every year.

"The patterns are not always the same every year as sometimes there is also deflation or flat movement. So this is a mix of various influences and therefore difficult to predict. So there are seasonal factors, administered price factors and also expectations factors," he said.

BI deputy governor Budi Mulya meanwhile said Bank Indonesia expected to be able to withdraw up to Rp50 trillion of excess liquidity in banks through the decision.

"The 8 percent hike in GWM must be done as inflationary pressure has increased in the past two months and it is expected to continue to rise," he said at a press conference here on Friday.

Mulya said total excess liquidity in banks right now reached above Rp300 trillion and so by withdrawing only around Rp50 trillion the room is still available for banks to increase credit distribution.

BI meanwhile had also decided to maintain its key interest rate at 6.5 percent.(*)

Editor: Heru
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