The Effect of Monetary Policy Indicators Analysis by Using Interest Rate and Money Supply Approach to the Inflation in Aceh

Since 2005, Bank Indonesia as the Monetary Authority has implemented a monetary policy framework whose main objective is to maintain inflation rate in line with the stipulated by the government. The monetary policy indicators used to achieve these objectives are the interest rate and money supply approaches, in which Bank Indonesia can choose one of the indicators of the monetary policy. The purpose of this study is to analyze how the influence of monetary policy with the approach of interest rates and money supply to the inflation in Aceh. This analysis uses interest rates and money supply as an independent variable, while inflation as a dependent variable. The research method used is quantitative in the form of secondary data. The data analysis model uses multiple linear regression. This means that if interest rates rise then inflation is high, and vice versa if interest rates fall then inflation is low. it should be the relationship between interest rates with inflation is negative. Furthermore, monetary policy with money supply approach has a significant effect and negative relation to inflation. This means that if the money supply is high, then the inflation is low, and vice versa if money supply is little then the inflation is high. Therefore, it is better for Bank Indonesia to choose monetary policy indicator with money supply approach in order to achieve the target to keep inflation rate as determined by the government.