U.S. rate hike could hurtRI economy
<p>U.S. rate hike could hurtRI economy</p><p>Rendi A. Witular, The Jakarta Post/Jakarta</p><p> Higher interest-rate environment in the United States is likely
to put further pressure on the local economy next year, amid
already high inflationary pressure at home following the fuel
price hike and the rupiah's shaky footing, says Vice President
Jusuf Kalla.</p><p>Both would most likely drive domestic interest rates up and
could eventually put a brake on loan expansion and business
activities, Jusuf said on Friday.</p><p>"The government will seriously focus on easing inflationary
pressure next year at a time when inflation in the United States
could trigger higher interest rates there," said Kalla after
Friday prayers.</p><p>"Even a rumor over another possible hike in the U.S. interest
rates will send a 'fever' to other countries. Whatever happens in
the U.S. economy will not only affect Indonesia but also other
countries," he said.</p><p>As reported by the media, there is a strong chance the U.S.
Federal Reserve will raise interest rates further as inflation is
now seen as a threat to the world's largest economy after recent
twin hurricane disasters.</p><p>At present, the federal funds rate stands at 3.75 percent,
with predictions that it could rise to a level of 4.5 percent
some time next year.</p><p>Consequently, Bank Indonesia would be put under more pressure
to continue its moves to raise its benchmark interest rates, to
keep investors attracted to rupiah-based portfolios.</p><p>Kalla said the government and the central bank would take
appropriate measures to create a conducive business environment
in order to prevent investors from converting their rupiah
portfolio to U.S. dollars, which could severely hurt the local
currency.</p><p>The former businessman, however, did not elaborate on the
measures needed to keep the rupiah stable and inflation in check.</p><p>At present, the central bank's reference interest rate stands
at 11 percent, with on-year September inflation standing at 9.06
percent.</p><p>Government officials have projected full-year inflation is
likely to reach between 11 percent and 12 percent as a result of
a steep rise in the prices of subsidized fuels by the end of the
year.</p><p>For next year however, the government remains upbeat that
inflation could hover at between 7 percent and 8 percent, not
taking into account the impact of a power-rate hike and other
possible increases as a result of the higher fuel prices.</p>
to put further pressure on the local economy next year, amid
already high inflationary pressure at home following the fuel
price hike and the rupiah's shaky footing, says Vice President
Jusuf Kalla.</p><p>Both would most likely drive domestic interest rates up and
could eventually put a brake on loan expansion and business
activities, Jusuf said on Friday.</p><p>"The government will seriously focus on easing inflationary
pressure next year at a time when inflation in the United States
could trigger higher interest rates there," said Kalla after
Friday prayers.</p><p>"Even a rumor over another possible hike in the U.S. interest
rates will send a 'fever' to other countries. Whatever happens in
the U.S. economy will not only affect Indonesia but also other
countries," he said.</p><p>As reported by the media, there is a strong chance the U.S.
Federal Reserve will raise interest rates further as inflation is
now seen as a threat to the world's largest economy after recent
twin hurricane disasters.</p><p>At present, the federal funds rate stands at 3.75 percent,
with predictions that it could rise to a level of 4.5 percent
some time next year.</p><p>Consequently, Bank Indonesia would be put under more pressure
to continue its moves to raise its benchmark interest rates, to
keep investors attracted to rupiah-based portfolios.</p><p>Kalla said the government and the central bank would take
appropriate measures to create a conducive business environment
in order to prevent investors from converting their rupiah
portfolio to U.S. dollars, which could severely hurt the local
currency.</p><p>The former businessman, however, did not elaborate on the
measures needed to keep the rupiah stable and inflation in check.</p><p>At present, the central bank's reference interest rate stands
at 11 percent, with on-year September inflation standing at 9.06
percent.</p><p>Government officials have projected full-year inflation is
likely to reach between 11 percent and 12 percent as a result of
a steep rise in the prices of subsidized fuels by the end of the
year.</p><p>For next year however, the government remains upbeat that
inflation could hover at between 7 percent and 8 percent, not
taking into account the impact of a power-rate hike and other
possible increases as a result of the higher fuel prices.</p>