BI Interest Rate Rises, Core Economist: Only Reduces Short-Term Rupiah Weakening

JAKARTA - Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira, said the increase in the benchmark interest rate was only a temporary damping of the rupiah in the short term.

"The increase in interest rates is only a drug for paracetamol to subside the short-term rupiah," Bhima said in a statement quoted on Thursday, April 25.

According to Bhima, with an interest rate increase of 50 basis points, it will not be able to prevent the weakening of the rupiah, let alone not raise the interest rate.

"Yes, if you want to use interest rates, let alone 25 bps, just as many as 50 bps is not enough to prevent the weakening of the rupiah," he said.

Meanwhile, Bhima conveyed that the effect of the increase in benchmark interest made the community even more burdened, because the purchase of houses and motorized vehicles mostly used credit facilities.

In addition, according to him, the increase in benchmark interest also causes other consumption loans to slow down.

"Bunga di Indonesia sudah tinggi ditambah naiknya suku bunga acuan BI semakin tinggi lagi," tuturnya.

Therefore, said Bhima, public income allocated to pay credit installments can be greater in portion and reduce the allocation of other goods purchases.

Bhima said, to anticipate this, the Government must immediately issue a fiscal policy package containing stimulus to the retail sector, especially delaying the implementation of VAT 12 percent by 2025.

"To enlarge the KUR interest subsidy (People's Business Credit), den enlarges the allocation of social protection funds," he concluded.