Bank Indonesia urged not to increase its reference rate
The Jakarta Post
Experts have urged Bank Indonesia (BI) not to increase its benchmark seven-day reverse repo rate because of easing external pressures against the rupiah.
The US dollar would likely cease strengthening because of both fiscal and current-account deficits in the United States, CIMB Niaga chief economist Adrian Panggabean said in Jakarta on Monday.
“I expect that the US dollar will no longer strengthen because fundamentally, the US fiscal and current-account deficits will put pressure on the country’s inflation; it will weaken the dollar,” Adrian said as reported by kompas.com.
He added that the US would also work to maintain its exports by preventing the further strengthening of its currency.
“So, the strengthening of the dollar is temporary. And the rupiah is now at the level of 13,000; no longer at the 14,000 level,” he said.
Bank Indonesia, he further explained, did not need to increase its reference rate because the recent weakening of the rupiah was not the cause of Indonesia’s economic fundamental condition, but due to external factors that had affected many countries.
Adrian also noted that the rupiah exchange rate against other currencies was relatively stable.
Similar comments were made by stock market analyst Satrio Utomo, who agreed that BI did not need to increase its reference rate.
“It is regrettable that in such a conducive condition, BI announced that it might increase its reference rate. It is contradiction to the market condition,” Satrio said on Monday.
However, the central bank’s statement might merely suggest that it was ready to all-out defend the rupiah. (bbn)
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