Geopolitical Conflict Heats Up, This Is Advice From BI Boss

BI Governor Perry Warjiyo (Photo: dock. Antara)

JAKARTA - Bank Indonesia (BI) Governor Perry Warjiyo revealed that the increasing geopolitical tension has driven energy and food prices to increase, resulting in the high global inflation.

"To control inflation, the monetary policy interest rate in developed countries, including the Federal Funds Rate (FFR), is predicted to remain high for a longer period of time (higher for longer)," he explained, Thursday, October 19.

Perry revealed that the increase in global interest rates is expected to be followed in the long-term tenor with an increase in the yield of government bonds in developed countries, especially the US (US Treasury).

This resulted in an increase in government debt financing needs, and an increase in the long-term risk premium (term-premia).

These developments encourage the reversal of capital flows from the Emerging Market Economics (EMEs) to developed countries and to more liquid assets.

"This resulted in the emergent term, cash is the king. The US dollar rose sharply against various currencies in the world," he added.

According to Perry, with increasing geopolitical tensions, global economic and financial uncertainty is getting higher, thus requiring a strengthening of policy responses to mitigate the negative impact of the global ban on domestic economic resilience in EMES countries, including Indonesia.