JAKARTA, July 24 (Reuters) - Indonesia’s central bank will launch a new benchmark for overnight interbank money market next week, called “Indonia”, which will eventually replace the existing Jakarta Interbank Offered Rate (JIBOR), a senior bank said on Tuesday.
The Indonia rate would be set at 7pm local time everyday based on rates traded in the interbank overnight lending market from 8am to 6pm during the day. That compares with the existing overnight JIBOR benchmark, which is based on quotations sent to the central bank by commercial banks.
The change was aimed at improving the credibility of benchmark rates, Nanang Hendarsah, Bank Indonesia’s (BI) head of monetary management department said.
“Through Indonia, we want to bring the overnight rates closer to our benchmark policy rate so that our policy rate becomes more credible,” Hendarsah told a briefing, adding that he hopes treasury bankers would use the Indonia rate for trading in the next day.
Last week, BI held its benchmark policy rate steady at 5.25 percent, taking a pause in its monetary tightening cycle after three interest rate hikes by a total of 100 basis points from May 17 to June 29.
For comparison, the overnight JIBOR on Tuesday was 5.00056 percent.
Reporting by Maikel Jefriando and Gayatri Suroyo; Editing by Sam Holmes