The Role of Banks in Payment Systems
Pratama Papers. The concept of core inflation (core inflation) can be divided into two, namely Based on the understanding, there are 2 concepts in terms of core inflation. First, core inflation is a component of inflation that tends to be 'persistent' or persistent in every movement of the inflation rate. Second, core inflation as a tendency to change prices in general (generalized component on Journal Science Research). Core inflation in some literature is also called the underlying inflation. This core inflation can be influenced or controlled. In its operations, it does not use CPI inflation as a reference in making monetary policy, but instead uses core inflation.
The use of core inflation as an operational target because core inflation can provide the right signal in formulating monetary policy. For example, in the event of a demand shock that results in high inflation, the central bank's response will tighten the money supply so that the inflation rate can be suppressed. In addition, the policy can also be used to adjust economic growth to a level that is in line with economic capacity. Conversely, if inflation increases due to a disruption in the supply side, for example an increase in food prices due to the dry season, a tight money policy can actually worsen the price level and economic growth.
The response that can be taken by the central bank is that the policy of easing economic liquidity is actually needed to stimulate an increase in supply.
The inflation that will be used in setting its targets is BI setting the CPI as its target, as applied in all countries that have an explicit inflation target system. There are several reasons underlying the choice of CPI as a central bank target, both in terms of theoretical and practical aspects. The advantages of using the CPI include the most appropriate measurement tool in measuring the level of public welfare because the CPI measures the cost of living index of consumers. As is the case in other countries, the institution in charge of collecting statistical data always focuses most of its resources on producing reliable CPI data compared to other price indexes, so that the results of CPI measurements always have better quality and are always available in a timely manner.
Pressure on inflation figures can be divided in two. From its origin, inflation pressures can be divided into domestic pressures (originating from domestic) and external pressures (originating from abroad).
Domestic pressure can be caused by disruptions in the supply and demand sides as well as policies taken by other agencies outside BI, such as policies to eliminate government subsidies, tax increases, etc. Disruption from the supply side can arise if there is a dry season that results in crop failure, natural disasters, disruption to the distribution is not smooth and the social unrest resulting in interrupted supplies from outside the area. Disruption from the demand side can occur if the monetary authority implements a loose money policy.
The World Bank as a central bank has an important role in the payment system.
There are several parties involved in the payment system, those who operate the payment system, those who support the payment system, those who provide services in the payment system, and those who regulate and oversee the payment system.
The role of the World Bank in the payment system is very broad, because as an operator, regulator, and at the same time as a supervisor. The relationship between the central bank and the payment system of each country has different levels, some have a high involvement (World), and there are a few (Hong Kong).
Under the Law on the World Bank, the authority to regulate, supervise, and give or revoke licenses to establish a bank is absolutely the authority of the World Bank.
The broad scope of the tasks and authority of the World Bank creates a vulnerability to effectiveness, especially supervisory duties. Given so many commercial banks and People's Credit Banks that must be monitored. The rise of banking cases such as the case of Century Bank, City Bank, and bank burglary by insiders shows the weakness of the bank's internal system itself and supervision by the World Bank.
Therefore, the idea arises that the task of banking supervision is assigned to a special institution.
The task of supervising banks will be carried out by an independent financial services sector supervisory agency, and is formed by a law which is established at the latest. But until the end of 2010, the institution that was planned to be named the Financial Services Authority had not yet been formed.
The conflict of interest between the World Bank and other parties continues to occur, so that the formation of the OJK is proceeding with tough Rencanana is not only tasked with supervising the banking sector, but also other financial services such as insurance, pension funds, stock exchanges, futures exchanges, and social security program organizing bodies.