Economist Says Now Is The Time For BI To Boost Interest Rates

Illustration (Photo: Doc. Antara)

JAKARTA - Fundamental analyst Kanaka Hita Solvera (KHS) Raditya Pradana said that the plan to announce the benchmark interest rate of Bank Indonesia (BI) today should be accompanied by a new interest rate policy.

According to him, the determination of low interest rates that have been in effect for the past two years is considered not to reflect current economic conditions.

"In our opinion, BI should have started to raise interest rates," he told VOI on Tuesday, August 23.

Raditya realizes that the core inflation rate which is one of the important references in determining the BI rate is still under control. However, he considers that the central bank needs to prepare strategic steps in dealing with the potential for high inflation spikes related to rumors of an increase in subsidized fuel prices.

“When compared to the world, Indonesia's inflation is still under control. However, it should be noted that if the price of pertalite rises to the level of Rp. 10,000 per liter, Indonesia's annual inflation will increase significantly," he said.

Furthermore, Raditya sees that every increase in the BI rate will certainly be accompanied by positive and negative impacts. Of course, this has been carefully considered by the central bank officials when adopting a policy of raising interest rates.

"If the benchmark interest rate rises, it can reduce inflation, but the negative effect is an increase in the cost of funds for debtors, which of course can disrupt the economic recovery process," he asserted.

As is known, this afternoon Bank Indonesia will announce the results of the Board of Governors' Meeting. One of the awaited material is related to the determination of the interest rate which is now perched at the level of 3.50 since 2020.