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November 21, 2024 | 02:04 pm
TEMPO.CO, Jakarta - Bank Indonesia (BI) Governor Perry Warjiyo has expressed concerns about the potential impact of the United States' economic policies under President Donald Trump on global currency exchange rates. Trump's domestic-oriented policies are expected to strengthen the US dollar, leading to increased pressure on other currencies.
“Global investor preferences have shifted towards the U.S. As a result, the pressure to weaken the value of global currency exchange rates is increasing,” Perry said during a press conference on Wednesday, November 20, 2024.
Perry added that the relocation of global investor portfolios has led to capital outflows from various emerging markets. He emphasized the need for stronger policy responses from countries like Indonesia to maintain external resilience in the face of these global economic trends.
Perry also highlighted the potential risks of a more expansive U.S. fiscal policy, which could lead to higher trade tariffs and slower global economic growth. This, in turn, could contribute to rising global inflation.
“The slower pace of inflation reduction in the U.S. may limit the Fed's ability to cut interest rates,” Perry added.
Moreover, increased U.S. fiscal deficit financing is expected to drive up U.S. Treasury bond yields, both short-term and long-term.
In response to these global economic developments, the BI Board of Governors has decided to maintain the benchmark interest rate at 6 percent, the deposit facility interest rate at 5.25 percent, and the lending facility interest rate at 6.75 percent.
Perry explained that this decision aligns with the central bank's monetary policy framework, which aims to keep inflation within the target range of 1.5 to 3.5 percent for 2024 and 2025 while supporting sustainable economic growth.
The BI Governor emphasized that the current focus of monetary policy is to stabilize the rupiah exchange rate, which has weakened due to geopolitical factors, including the election of Donald Trump as U.S. President.
Vedro Imanuel contributed to this article.
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