T

he central bank and analysts have brushed off concerns about the anticipated volatility of Indonesia’s economy following the US Federal Reserve’s recent affirmation of a possible earlier-than-expected interest-rate hike.

On Friday, Fed chair Janet Yellen stated that a rate hike in coming months “would be appropriate”, citing “a great deal of progress” in the world’s largest economy.

The statement subsequently surprised the market, which expected a more dovish statement after several Fed officials previously hinted that the US central bank was preparing to follow up on an initial policy tightening in December.

The Fed increased its interest rate in December last year after almost a decade.

Yellen’s statement was important as she expressed a similar hawkish statement as those of her colleagues while she usually tried to provide balance in a situation, said Bank Indonesia (BI) monetary management department director Pribadi Santoso.

“BI’s economic projection has taken into account since early this year two fund rate hikes by the Fed,” Pribadi said over the weekend during a discussion in Karawaci, South Tangerang, Banten.

He also suggested that the recent development in the US would not significantly affect the central bank’s policy.

BI predicted the rate hikes would occur in this year’s second half.

As the increase will probably occur earlier, BI, Pribadi continued, would look at the development of global and domestic economic data before taking any action. If the data were supportive for a revision in BI’s projection and policy, the central bank would follow them, he said.

However, he was of the view that his office would not change any of its policy as the country was more ready now and the market had also priced in the possible rate hike.

“We’re always in the market to supervise the situation and intervene if it is needed,” he asserted.

The US economy expanded at a slightly faster pace in the first quarter than initially estimated, Commerce Department data showed Friday.

“It’s appropriate [...] for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months such a move would be appropriate,” Yellen said during an appearance at Harvard University, as quoted by Reuters.

Separately, Mandiri Sekuritas chief economist Leo Putra Rinaldy said he held the view that the Fed would watch the market’s responses before making any decision, although he projected there would be two or three rate hikes throughout this year.

“The Fed and the market are like the chicken and the egg,” he said during the same event, since the Fed would follow the market while the latter at the same time was waiting for the Fed’s decision.

He projected the Fed fund rate hike would not happen in June but in July, which is what more market players predicted.

Bank Permata has previously predicted the Fed rate hikes will happen in September and November. However, the recent development shows a drastic change of the US central bank’s mood, said the lender’s economist, Josua Pardede.

“However, the market’s reaction will not be as hasty as the first hike [in December],” he said.

The rupiah value against the US dollar, he said, would weaken but still remain at a healthy level compared to last year, given a supportive BI monetary policy and the government’s economic measures. If foreign investment outflows occurred, they would be as severe as those after the first hike, Josua added.

Some stocks traders will probably join a selling spree, but that will be more of a tactic to gain profits than a fundamental act.

The benchmark Jakarta Composite Index (JCI) gained 0.44 percent to 4,836 as of the end of Monday’s trading session while the value of the rupiah dropped 0.48 percent to 13,641 against the greenback.