JAKARTA. The meeting of BI or the Central Bank’s Board of Governor this month decided to maintain BI 7-day reserve repo rate at the level of 4.75%. This decision aims at anticipating global and domestic risks.
The risks include Trump’s fiscal policy, which will be more expansive. Trump’s policy direction is predicted to bring serious risk for the domestic economy.
Executive Director of Economic and Monetary Policy Department of BI Juda Agung assessed that Trump apparently will not implement some of his promises during campaign period. However, there will be fiscal adjustments, which may increase the budget.
The US is unlikely to launch fiscal maneuver in an agressive manner. Recently, the US’ budget deficit has reached 4.4% of Gross Domestic Product (GDP), while the US’ debt ratio reached 106% of GDP.
BI also needs to be cautious of Trump’s protectionist policy, which will affect to some countries, which have cooperation agreement with the US.
Aside of those three factors, BI needs to monitor The Fed’s decisions on monetary policy. BI assesses that the combination of The Fed and Trump’s policies may increase cost of borrowing of Indonesia’s debt.
Subsequently, BI will monitor the global price of crude oil, which is potentially to increase in this year. Inflation rate is also potentially will increase due to the adjustment of administered prices.
According to Juda, BI will support economic growth by implementing interest rate policy and considering various risks. “BI has reduced (the benchmark interest rate) by 150 basis points. We also have sufficient liquidity,” Juda said.
Deputy Governor of BI Perry Warjiyo added, BI will direct the interest rate to maintain financial system stability, not to boost economic growth in this year.
BI will utilize liquidity, macro prudential, and financial system instruments. BI also wants to utilize the liquidity to support banking sector to channel credits.
Economist of Samuel Aset Manajemen Lana Soelistianingsih assessed, BI still has chance to grant relaxation, on the grounds that rupiah foreign exchange tends to stable.
BI has that chance in the first semester. However, BI yet to take the chance until Trump releases his policy. Lana added that the relaxation will not bring significant domestic economic growth. The most effective instrument in boosting economic growth in this year is government’s fiscal policy. (Muhammad Farid/Translator)
Cek Berita dan Artikel yang lain di Google News
