Negative Impact of Increase in Fed Rate Already Predicted
19 December 2015 16:50 WIB
TEMPO.CO, Jakarta - The Indonesian Stock Exchange (BEI) said the negative impact of an increase in the interest rate of the U.S. central bank was already expected that the stock market could remains in positive area.
"The increase in the Fed fund rate has been predicted . Now the situation of uncertainty is over," BEI President Director Tito Sulistio said on Thursday.
He said despite the increase in the Fed fund rate, the investment yield offered in the United States remain zero, therefore, Indonesia could still draw investors with its investment yield.
The Fed decided to raise its fund rate by 25 basis to 0.50 percent as against Bank Indonesia benchmark interest rate (BI rate) of 7.5 percent.
Tito Sulistio hopes that Bank Indonesia would cut its BI rate that the spread is not too wide especially as the country's inflation is also low this year.
The Central Bureau of Statistics (BPS) said inflation in November was only 0.21 percent that cumulatively inflation in the first 11 months of this year was 2.37 percent.
Year-on-year the inflation in November was 4.89 percent.
Bank Indonesia predicted that the country's inflation this year is around 4 percent.
"The gap between BI rate and inflation is quite wide at 3.5 percent . Hopefully Ban Indonesia would agree to reduce the gap," Tito said.
Vice President for Research and Analysis Valbury Asia Securities Nico Omer Jonckheere said the government wanted Bank Indonesia to cut its BI rate to help boost economic growth.
"Indeed, it is risky for Bank Indonesia to accept the government request at present as it may trigger capital flight.
"Bank Indonesia, therefore, is expected to maintain its BI rate," Nico said.
Bank Indonesia was to hold meeting of its board of governors to determine its benchmark interest rate.
ANTARA