Bank Indonesia Predicts 5 Percent Fed Interest Rate for Q1 of 2023
TEMPO.CO, Jakarta - Bank Indonesia Governor Perry Wardjiyo predicted that the United States Federal Reserve interest rate will peak at 5 percent at Q1 of 2023. However, higher risk factors may increase the interest rate up to 5.25, or even 6 percent.
"The Fed's interest rate increase will continue throughout 2023. With a ceiling baseline of 5 percent, the quickest decrease will be to a level of 4.75 percent by the end of 2023," Perry said in a webinar on Indonesian Economic Projection in Jakarta on Monday, December 5, 2022.
Perry predicted that the Fed's interest rate increase will fuel further strengthening of the United States Dollar in 2023, which consequently will put pressure on most of the world's currency, including Rupiah.
"The US Dollar had once reached an index level of 114 against foreign currency, strengthened by more or less 25 percent [yoy], in the past few weeks the US Dollar index starting to weaken to a level of 106," Perry said.
In the future, the US Dollar improvement will depend on inflation, the Fed interest rate increase, and how the Fed will balance out benchmark interest rate with risks of a recession.
However, according to Perry, the Rupiah exchange rate will remain strong in 2023 with the support of a robust national economy, which continues to grow by 4.7 to 5.3 percent.
In 2022, Bank Indonesia also conducted various efforts to maintain the Rupiah exchange rate in an attempt to prevent imported inflation, keeping the Rupiah depreciation rate to only 9 percent.
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