JAKARTA - Former Minister of Finance and Governor of Bank Indonesia Agus Martowardojo said a policy mix was needed to maintain national economic growth amid the pressures of weakening the global economy.
"With the policy mix, we mean first, continuing to raise interest rates, although at a slower pace than the Fed, while willing to tolerate some currency flexibility, but also opportunically intervene in foreign exchange markets to smooth out volatility," he said at the SOE International Conference quoted by Antara, Tuesday, October 18.
The central bank cannot only focus on maintaining the rupiah exchange rate. The central bank's policy of lowering currency reserves could only slow down the rate of rupiah depreciation, but could not reverse the fundamental trend leading to the strengthening of the US dollar on a global scale.
He also said that accommodative macroprudential policies were needed to revive the distribution of bank credit to corporations.
Inflation also needs to be controlled by the Inflation Control Team both at the national and regional levels to ensure supplies are maintained, especially commodities with volatile prices.
"In particular, Bank Indonesia will pay attention to the second round effect of rising fuel prices last September, and this is likely to require some assessments because the supply side factor will contribute significantly to rising inflation. Therefore, BI must strengthen coordination with the government to provide some mitigation effects," he said.
According to him, a good balance between monetary policy and careful fiscal policy, while continuing structural reforms together will result in a policy mix that will bring Indonesia forward and reduce global risks that are increasingly uncertain.
Amid uncertainty, he believes it is important not to ignore long-term investment opportunities, for example in the infrastructure sector, which can help advance sustainable economic growth.
"We also believe the current inflation environment will increase demand for next-generation technology solutions in various fields, such as cloud computing and digital transformation, there may also be be be be beneficiaries of focusing on the details of reality by policymakers," he said.
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