Economist: Bank Indonesia Need's to Counteract Higher FED Rates

10 March 2023 02:14

On Tuesday this week, The FED’s Chairman Jerome Powell warned that the fed is likely to raise interest rates higher than expected. Powell’s Hawkish remarks caused global markets to tumble while Indonesia analysts say that bank Indonesia needs to react otherwise higher fed rate hikes could spell trouble for the Indonesian rupiah.

Director of cellos thinks tank Bhima yudhistira said that the FED Chairman's warnings of higher-than-expected fed rate hikes will have a serious impact on emerging markets including Indonesia.

The FED Chair's Hawkish tone will signal to investors that global inflation will remain high this year. That will push more investors to seek safe-haven assets like gold or the US dollar and thus has the potential to put pressure on the Indonesian rupiah.

As a result, Bhima believes that bank Indonesia needs to counteract potentially higher fed rate hikes by hiking Indonesia's benchmark interest rates to make conditions in the Indonesian market, more attractive for investors.