BI Reveals US Economic Policy Increases Global Market Uncertainty

Director of the Department of Economic Policy & Monetary (DKEM) Bank Indonesia Juli Budi Winantya (right). (Photo: Aris Nurjani / VOI)

BANDA ACEH - Bank Indonesia (BI) assesses that the economic policy implemented by the new United States (US) government has the potential to increase inflation in the country, thus increasing uncertainty in the global market.

"So the policies that we both know are related to tariffs. This tariff will certainly make US inflation from the demand side, which in terms of demand will also be higher, in terms of tariffs it will also make US inflation higher," said Director of the BI Department of Economic Policy & Monetary (DKEM). July Budi Winantya in BI Journalist Training, Friday, February 7th.

Juli conveyed that the second was related to the policy of cutting corporate tax rates, which played a role in encouraging domestic demand, which ultimately triggered higher inflation despite encouraging economic growth.

According to him, the tax incentive also has implications for increasing the US fiscal deficit, thus requiring greater financing.

Where an increasing deficit will lead to an increase in yields (yield) of US bonds, both in the short and long term.

"So this will also affect the increase in the yield of US dollars due to the increase in the deficit," he explained.

Juli said the third was related to the policy of deportation or tightening against illegal workers, which is expected to tighten the labor market in the US, which also has the potential to increase inflation levels.

Juli stated that tariff policies, tax policies, and labor policy could cause uncertainty in the global market.

This has an impact on several things, including higher inflation and different expectations of the Federal Fund Rate (FFR) decline, so that the reduction process will be slower than originally estimated.

July said higher inflation was caused by demand factors and price increases influenced by tariff policies. In addition, tax policies also have an impact on fiscal and yield deficits, which cause yields in the US to be more attractive, thus increasing uncertainty in the global market.