A. THE ROLE OF MONETARY SECTOR IN INDONESIA The role of monetary sector in Indonesia can be seen from the history of the development of Inflation in Indonesia, where in 1997, Indonesia suffered a high rate of inflation, which led to people's lives in Indonesia to be derailed. But eventually the bleak can be exceeded. The economy is getting better along with a stable political conditions at the time of the Reformation. In line with that, the year 1999 was a milestone for the Bank Indonesia with the promulgation of Act No. 23 of 1999 on Bank Indonesia as amended by law No. 3 of 2004. In this law, Bank Indonesia was established as an independent State high institutions in carrying out the duties and authority. According to the law, Bank Indonesia is required to set the inflation target will be achieved as a foundation for planning and controlling the monetary. The following policies/actions taken to control the inflation In Indonesia Bank Indonesia has pursued a variety of efforts to achieve the target of inflation, namely:1. Soak up the excess liquidityTo dampen the weakening rupiah exchange rates against inflation as it absorbs excess liquidity BI through open market operations instrument. 2. Do foreign currency Sterilization BI do restricted policy transaction dollars by non-residents of indonesia. 3. Reduce high inflation expectations BI set up goals for low inflation at the beginning of the year.
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