A Purbaya nomination would probably weaken the rupiah immediately. The problem would not merely be his personality or communication style. It would be the policy signal attached to his nomination. That public denial matters and makes his appointment less likely, but investors should still consider the scenario because his name is now part of the political discussion. Purbaya has repeatedly advocated abundant liquidity and lower financing costs to accelerate economic growth. Reuters reported that he and Perry disagreed over liquidity policy, including the transfer of Rp200 trillion from the central bank into state-owned banks, with Perry more concerned about the consequences for the rupiah. If the official who challenged BI’s defensive monetary stance were subsequently appointed to lead BI, markets would interpret the move as the government taking control of the institution after failing to persuade it. That would look less like coordination and more like capture. nvestors would probably assume that the reaction function had changed from: "Defend stability first, support growth where possible" to: "Support the President’s growth target first, defend the rupiah when forced to do so." Under those circumstances, Purbaya would enter the position with a severe credibility deficit. The market would price him as a potentially reckless monetary captain until he proved otherwise. This could produce a weaker rupiah, higher government-bond yields, greater demand for dollar hedging and a higher risk premium for Indonesian assets. Ironically, appointing him to lower financing costs could raise the government’s long-term borrowing costs because investors would demand greater compensation for inflation, currency and institutional risk. What is the main idea of text?, Purbaya's economic policies would definitely cause the rupiah to collapse., Purbaya's potential appointment could weaken investor confidence because of concerns about his monetary policy stance and the credibility of the central bank., What does the phrase “That public denial” refer to in the second paragraph?, Purbaya's denial of having advocated lower financing costs., The government's denial of Purbaya's possible nomination., What is the author's main purpose in writing the text?, To announce Purbaya's appointment as governor of Bank Indonesia., To explain why Purbaya's possible appointment could create negative reactions in financial markets.

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