Lawmakers urged Bank Indonesia to take “bold but measured steps” to ease borrowing costs in the face of the Federal Reserve’s higher-for-longer interest rate path.
(Bloomberg) — Lawmakers urged Bank Indonesia to take “bold but measured steps” to ease borrowing costs in the face of the Federal Reserve’s higher-for-longer interest rate path.
Southeast Asia’s largest economy has proven to be more resilient than even developed nations, affording the central bank the space to bring its policy rate lower than the US, according to Said Abdullah, head of the parliament’s budget committee.
“So if the Fed is going to impose high rates for a long time, BI must be able to transform into a confident representative of the nation,” he said on behalf of the budget panel on Thursday. A “more moderate” BI rate will allow the government to encourage businesses to invest, given next year’s elections will be an opportunity to boost growth beyond the 5.2% estimate, he added.
Central bank officials didn’t respond to the remarks during the hearing.
Bank Indonesia will decide on its benchmark rate on Sept. 21, hours after the Fed’s own policy meeting, after keeping the seven-day reverse repurchase rate unchanged at a four-year high of 5.75% since February. While inflation has continued to ease, fund outflows have fueled the rupiah’s 3% decline over the last three months.
The central bank has enough ammunition to keep the currency stable, said Abdullah. The monetary authority collected $277.3 million of export proceeds in its foreign-currency deposits on Thursday, the most since the facility was launched.
“We have extraordinary exports wealth,” the lawmaker added, especially given a recent rule on trade earnings. “So BI needs to be careful about following the Fed’s dancing style of playing at high interest rates.”
(Updates with latest export earnings deposit data.)
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