Jakarta, CNBC Indonesia – The Indonesian economy is predicted to experience several waves of threats next year. One of them is the Taper Tantrum, which is a phenomenon where capital flows in Indonesia return to developed countries due to tightening policies of the central bank of investors’ home countries.
This was stated by the Minister of Finance Sri Mulyani Indrawati. He said there are several instruments that are being prepared in anticipation of this.
“We have learned from previous phenomena such as the taper tantrum in 2013, where expectations of normalization of US monetary policy can encourage a reversal of capital flows from developing countries,” Sri Mulyani explained in a plenary meeting, Monday (31/5/2021).
Likewise, the Governor of Bank Indonesia (BI) Perry Warjiyo is also wary of tapering off or reducing stimulus in the form of buying securities on the debt securities market by the Central Bank of the United States or the Fed.
“In the financial market, there has been an increase in US Treasury yields due to the large fiscal stimulus of US$ 1.9 trillion. This uncertainty is still ongoing even though it has eased a bit because of the clarity of the direction of the Fed, which this year will not yet conduct tapering,” explained Perry in a meeting with the National Board DPR budget (Banggar), Monday (31/5/2021).
“But next year, we are still considering the possibility that the Fed will start changing its monetary policy, start reducing liquidity intervention and even tightening and increasing interest rates,” Perry continued.
One of the steps to anticipate this is to form cooperation with authorities such as Bank Indonesia (BI) and the Financial Services Authority (OJK) in relation to the deepening and development of financial markets.
The government agrees that a deep, active, and liquid domestic financial market is necessary to improve market stability, which in turn will reduce the yield of SUN.
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