BI Optimistic The Fed Will Cut Interest Rates Faster

BI Governor Perry Warjiyo (Photo: dock. Antara)

JAKARTA - Bank Indonesia (BI) Governor Perry Warjiyo revealed that the Fed Fund Rate (FFR) has a faster chance of decreasing the Fed in line with the easing of monetary policy uncertainty in developed countries and slowing global inflationary pressures.

Perry said this was reflected in the United States (US), inflation is expected to approach the medium-term inflation target of 2 percent amid slowing economic growth and rising unemployment rates.

"This development encourages the prospect of a faster and bigger Fed Funds Rate (FFR) decline than originally estimated," he said at a press conference on the results of the RDG BI, Wednesday, September 18.

In line with that, Perry said that the 2-year US Treasury tenor yield decreased by more so that it became lower than the 10-year US Treasury yield and the U.S. currency index against major currencies (DXY) also weakened.

"In Europe, the European Central Bank (ECB) has lowered its monetary policy interest rate in line with inflation which has decreased towards a medium-term target of 2 percent. In Asia, the People Bank of China (PBoC) has also lowered interest rates in line with low inflation and weak domestic demand," he said.

Perry said these developments encourage the easing of global financial market uncertainty and increase foreign capital inflows to developing countries, including Indonesia.

"In the future, it is predicted that the clarity of the direction of lowering the interest rate of developed countries, especially the US, will further encourage foreign capital inflows and strengthen the external stability of developing countries," he said.

Perry explained that this development will support the economic policies of developing countries for their domestic economic goals in maintaining stability and encouraging economic growth.