Indonesia Is Relatively Safe From The Impact Of The Fed's Interest Rate Increase

Illustration. (Photo: Doc. Antara)

JAKARTA - Economist and Director of the Center of Reform on Economics (CORE) Piter Abdullah said Indonesia is relatively safe from the impact of the increase in the Federal Reserve (The Fed) benchmark interest rate.

The Fed's interest rate only has an impact on the financial market, not directly on the real sector. Meanwhile, our economic growth is driven by the real sector," Piter said, quoted from Antara, Friday, March 24.

Even so, Piter said that the current condition of Indonesia's financial market is still under Bank Indonesia (BI) control. This is reflected in the condition of the rupiah exchange rate which is not very depreciated, the liquidity of banking is still maintained, and the increase in inflation which tends not to be sharp.

"I think it's still relatively safe for BI," Piter said.

Therefore, Piter predicts BI will not participate in raising the benchmark interest rate by 25 basis points (bps) or 0.25 percent as the Fed does.

The CORE economist added that Indonesia is relatively resilient in dealing with the increase in the benchmark interest rate. This is because Indonesia is used to having a benchmark interest rate above 5 percent.

Therefore, even though BI has finally raised the benchmark interest rate, the Indonesian economy will not be too shaken.

"The global economic condition is facing the problem of bank failure in America and Europe. However, the systemic impact of events in America and Europe is not big on our economy," Piter said.

It is known that the Fed officially raised the target for the benchmark interest rate at the Federal Open Market Committee (FOMC) meeting, Wednesday, March 22. With an increase of 0.25 percent, the Fed's benchmark interest rate is currently at the level of 4.75 percent to 5 percent.

The increase in benchmark interest rates was carried out amid the turmoil in the banking sector with the collapse of Silicon Valley Bank and Signature Bank.