U.S. rate hike could hurtRI economy<\/p>\n
Rendi A. Witular, The Jakarta Post\/Jakarta<\/p>\n
Higher interest-rate environment in the United States is likely
\nto put further pressure on the local economy next year, amid
\nalready high inflationary pressure at home following the fuel
\nprice hike and the rupiah's shaky footing, says Vice President
\nJusuf Kalla.<\/p>\n
Both would most likely drive domestic interest rates up and
\ncould eventually put a brake on loan expansion and business
\nactivities, Jusuf said on Friday.<\/p>\n
\"The government will seriously focus on easing inflationary
\npressure next year at a time when inflation in the United States
\ncould trigger higher interest rates there,\" said Kalla after
\nFriday prayers.<\/p>\n
\"Even a rumor over another possible hike in the U.S. interest
\nrates will send a 'fever' to other countries. Whatever happens in
\nthe U.S. economy will not only affect Indonesia but also other
\ncountries,\" he said.<\/p>\n
As reported by the media, there is a strong chance the U.S.
\nFederal Reserve will raise interest rates further as inflation is
\nnow seen as a threat to the world's largest economy after recent
\ntwin hurricane disasters.<\/p>\n
At present, the federal funds rate stands at 3.75 percent,
\nwith predictions that it could rise to a level of 4.5 percent
\nsome time next year.<\/p>\n
Consequently, Bank Indonesia would be put under more pressure
\nto continue its moves to raise its benchmark interest rates, to
\nkeep investors attracted to rupiah-based portfolios.<\/p>\n
Kalla said the government and the central bank would take
\nappropriate measures to create a conducive business environment
\nin order to prevent investors from converting their rupiah
\nportfolio to U.S. dollars, which could severely hurt the local
\ncurrency.<\/p>\n
The former businessman, however, did not elaborate on the
\nmeasures needed to keep the rupiah stable and inflation in check.<\/p>\n
At present, the central bank's reference interest rate stands
\nat 11 percent, with on-year September inflation standing at 9.06
\npercent.<\/p>\n
Government officials have projected full-year inflation is
\nlikely to reach between 11 percent and 12 percent as a result of
\na steep rise in the prices of subsidized fuels by the end of the
\nyear.<\/p>\n
For next year however, the government remains upbeat that
\ninflation could hover at between 7 percent and 8 percent, not
\ntaking into account the impact of a power-rate hike and other
\npossible increases as a result of the higher fuel prices.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/us-rate-hike-could-hurtri-economy-1447893297",
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