TEMPO.CO, Jakarta - Bank Indonesia pledged to maintain its "front loading", "preemptive" and "ahead of the curve" policy to prop up Rupiah currency amid escalation of potential global war in interest rates.
Deputy Governor of the Central Bank Dody Budi Waluyo made the statement on Monday, commenting about aggressive decision of Turkish Central Bank raising its benchmark interest rate by 625 basis points to 24 percent on Thursday.
"What is important is to keep capital inflows. Deficit in current account balance could be covered with foreign direct investment and portfolio investment," Dody said.
Dody refused to give a direct answer when asked whether the central bank had plan to raise its benchmark interest rate "7-Day Reverse Repo Rate" in the next meeting of its board of governors.
The central bank would consider all related factors, he said.
Read also: Conglomerate Deems Rupiah Depreciation Not to be Dwelled Upon
There are many factors to be considered internally and externally, he said, adding "Bank Indonesia would not just follow right away the step taken by the U.S. Central Bank, and what happened in Turkey," he said.
He said other advanced economies also may have to raise their interest rates such as Canada, and Sweden in the last quarter of 2018. The United States is still expected to raise its fund rate in September and December 2018.
He said the country`s economic fundamental is showing improvement. The trade deficit in August 2018 was US$1.02 billion, down from US$2.03 billion in the previous month.
He said the decline in the trade deficit is expected to continue contributing to cutting the current account deficit in the third quarter of 2018.
Meanwhile, inflation in the first eight months of the year was 3.2 percent year-on-year, or within the target of the Central Bank at 2.5-4.5 percent yoy this year.
The Central Bank is scheduled to hold its next annual Meeting of Governor Council on Sept. 26-27 this year. The meeting is expected to focus on policy to prop up the national currency.
ANTARA
