BI Unlikely to Adjust Its Benchmark Rate, Says Chief Economic Minister
“We can see the calculation on its fundamentals. Hence, there is no need to respond by raising the benchmark again,” Nasution stated in Jakarta on Wednesday.
The chief economic minister noted that Indonesia and the market players have made predictions with regard to the increase in The Fed`s benchmark that will take place after the Federal Open Market Committee (FOMC) meeting in March 2018.
Hence, there is no exaggerated concern over the plan of the Fed`s benchmark rate hike and no reason from Bank Indonesia to follow-up on doing the same.
According to Nasution, the weakening of the rupiah against the US dollar that occurred since early 2018 is also part of the market participants` response to the Fed`s plan.
“There is no big change, because all have to absorb this and has been calculated since two or three months,” Nasution, the former governor of BI, remarked.
Earlier, BI Governor Agus Martowardojo had stated that BI`s benchmark rate or 7-Day Reverse Repo Rate policy should not necessarily tighten or rise in March 2018, although the US central bank is almost certain to raise its benchmark interest rate.
One of the reasons is that the current condition of the domestic economic fundamentals is going well, as is apparent from the control of inflation targeted by the Central Bank at 2.5-4.5 percent year-on-year.
Moreover, although external economic pressures continue to overshadow and disrupt stability, especially the rupiah exchange rate, the exchange rate volatility has not been a cause of major concern.
The Federal Reserve will hold a meeting of the FOMC on March 20-21, 2018. Market participants believe the Fed will raise its benchmark interest rate, from the current level of 1.25-1.5 percent in March 2018 and then two to three folds during the rest of the year. (T/RS5/RS1)
Mi’raj Islamic News Agency (MINA)
