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Low inflation, strong exports help Indonesia anticipate fed rate hikes
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A woman walks past Bank Indonesia (BI) building. (thejakartapost.com/Wienda Parwitasari)
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s the US Federal Reserve signals three more rate hikes in 2017, Bank Indonesia (BI) has said Indonesia can withstand the impact as long as the government maintains low inflation and boosts exports.
Mirza Adityaswara, senior deputy BI governor, said maintaining low and stable inflation could help the central bank conduct monetary easing to stimulate the economy.
“In 2017, our challenge is that if the Fed increases the funds rate three times next year, we have to keep inflation under control,” he said in his opening remarks of a seminar titled “Indonesia Economy Outlook in 2017” on Friday.
Meanwhile, strengthening exports is also essential in preparing for fed rate hikes. Hopes are high that the sharp increase in palm oil and coal delivery, which significantly boosted exports in November, can continue next year, he said.
“A recovery in commodity prices such as coal will improve exports, although the figure is still not that significant now,” he said.
On Wednesday, the Fed raised its benchmark rate by a quarter percentage point, to between 0.5 and 0.75 percent, prompting BI to hold the seven-day reverse repo rate steady at 4.75 percent after trimming six times this year to jump start growth in the country’s economy. (win/evi)
