Jakarta, CNBC Indonesia – The economic recovery of the United States (US) took place faster than expected, inflation finally soared to 7.5%. President Joko Widodo (Jokowi) has warned for some time that this is a threat to the economy.
The spike in inflation will be met with a policy of raising the benchmark interest rate by the US Federal Reserve (The Fed). The market’s view is that 50 basis points is the Fed’s current choice, which is to be 0.5% – 0.75%.
The world, including Indonesia, will be affected by this policy. Reflecting on the US tapering a few years ago. This will cause capital outflow alias outflow and weaken the exchange rate.
“The external challenges of 2022 are mainly related to the normalization of the United States’ monetary policy,” Jokowi said in front of investors some time ago.
It’s just that Jokowi is quite optimistic, even if Indonesia is affected, it will not be as heavy as other countries. Even compared to the 2013 taper tantrum, Indonesia is currently much better.
This can be seen from the economic fundamentals. Continuing growth, along with aggressive Manufacturing PMI, increasing consumer confidence and increasing number of investors who invest in the country.
Furthermore, inflation is under control. Now its position is still around 2%, although there is an increase in the middle of this year due to increased demand and government policies, it will still move around 3-4%.
Another indicator is the external side, where the current account is in surplus. Even though the deficit this year, the percentage is still small. Meanwhile, in 2013, the current account deficit could be above 2% of GDP.
Bank Indonesia is also more prepared, in line with large foreign exchange reserves and also more varied instruments of monetary intervention.
“Although the US benchmark interest rate has risen, even though US treasury yields have increased, so far the impact on the rupiah exchange rate and the increase in domestic yields is still relatively under control,” said BI Governor Perry Warjiyo on a different occasion.
(me/me)
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