Low and stable inflation is seen as an asset for Indonesia to resist the Federal Reserve's plan to increase its reference rate four times this year, said Financial Services Authority (OJK) financial system stability department head Rendra Idris in Jakarta on Thursday.
He said if the Fed took another step to increase the rate, Bank Indonesia (BI) would also be pressured to increase its reference rate, but inflation would ease the pressure.
"If the government can keep the inflation by providing enough food supply, we can keep the rate competitive," he said during a press briefing at the OJK offices in Jakarta.
On Tuesday United States time, Fed Governor Jerome Powell hinted that the central bank would be more aggressive in response to possibly higher inflation amid cuts to corporate tax rates.
According to the Central Statistics Agency (BPS), inflation in February reached 3.18 percent year-on-year (yoy), compared to 3.83 percent yoy in February 2017.
Rendra added that if the pressure continued, BI still had adequate ammunition to stabilize the condition, such as releasing foreign currency reserves, which was recorded at US$131.98 billion in January.
"Basically, BI has a lot of ammunition other than increasing its reference rate. The central bank can go through other ways to cope with the possible rise of the Fed rate," he said. (bbn)