ABSTRACT: Using the event study method, this paper examines the impact of 31 monetary policy announcements in the form of the policy rate during the COVID-19 period on the financial sector’s performance in the Indonesia Stock Exchange. This study also analyzes the effect of monetary policy announcements when the policy interest rate is unchanged, decreases, and increases compared to the previous period. We found that all 31 policy rate announcements had no significant impact on the announcement day or Day 0. When the policy rate decreased during the event window, Abnormal Return (AR)was significantly positively influenced. Cumulative Abnormal Return (CAR) also experienced a positive upward trend. Furthermore, when the policy rate is unchanged, we found a significant negative effect on AR and CAR, showing greater dynamics response in unchanged monetary policy announcements and tending to be in a negative trend. Furthermore, when the policy rate increased, the impact on the financial sector AR was significantly positive, while CAR showed a dynamic response. This indicates that the financial sector’s response to monetary policy, which increases policy interest rates, is better than when monetary policy is unchanged or reduced.

KEYWORDS -event study; financial sector index; monetary policy announcement