Saturday, 19 January 2019

No Fed Rate Hike in 2019, BI Says

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  • Logo of Indonesia's central bank, Bank Indonesia. REUTERS/Fatima El-Kareem

    Logo of Indonesia's central bank, Bank Indonesia. REUTERS/Fatima El-Kareem

    TEMPO.CO, Jakarta - Bank Indonesia (BI) senior deputy governor Mirza Adityaswara said that US' central bank The Federal Reserve will not raise interest rates in 2019.

    According to Mirza, BI assumes that by 2019 America's interest rate hike cycle would have been over.

    “The bottom line is by 2019 the US will stop their interest rate hike,” he said in Jakarta on Monday, September 10.

    Mirza said that when that happens, pressure from the Fed Rate's negative sentiments will subside. Other factors that can stimulate an economic improvement is the easing trade tension between the US and China, also by 2019.

    Once all external factors have gone he said that Indonesia will be able to curb its current account deficit (CAD).

    "We believe that we can keep CAD below three percent in 2019," he remarked.

    Mirza said that the key to reducing CAD is to curb the trade deficit; which is by reducing imports of goods and services.

    Last year's current account deficit was around US$17 billion. As per this year’s first semester, tha CAD was IS$13.5 billion.

    As for domestic factors affecting the economy, Mirza said that the government has to be able to curb import volume. One way is by postponing infrastructure projects that have not began.

    “From what I've read, there are some 15 billion worth of infrastructure projects that have not started. And those would be rescheduled,” he said.

    There's also the mandate to use at least 20% of biodiesel mix in fuel. Where's our hopes that the policy can reduce oil import and fix the economy, since Indonesia’s oil import balance he's also suffering a deficit.