JAKARTA (TheInsiderStories) - After Donald Trump elected as United States president, Bank of Indonesia (BI) sees further hiking of Federal Reserve Fund Rate (FFR). The central bank estimating the FFR would likely rise by 25 basis points on DeCember, and further hike two times next year and continue to hike three times on 2018.
“The Fed fund rate hike following Trump win is already priced in on our latest monetary policy. We may see FFR rise once on Desember, followed by another hike two times in 2017 and three times in 2018,” said Agus Martowardojo, Central bank Governor at the joint press conference with Finance Minister Sri Mulyani Indrawati and Chairman of Financial Service Agence Muliaman Hadad in Jakarta.
BI recently loosening their policy rate by 25 basis points, considering FFR hike on December. The Trump effect, according to Agus, is not as big as Brexit effect. Indonesian rupiah was depreciated by 0.8 percent to Rp13,135 per US dollar yesterday, still in line with regional gauge depreciation.
Having said that, central bank still exercising trump impact combining with coming FFR hike on global financial and capital flow system. BI will maintain liquidity on currency market to give more confident to market. Also, monitoring the progress of US new president even activating management protocol, if needed. BI will also coordinate more with other central banks in the region to maintain surveillance.
“Fund in banking system passes IDR300 trillion and will likely reach IDR350 trillion, “ responding well-fundamental on Indonesia economy.
Meanwhile, Sri Mulyani admitted that as open country, Indonesia will be more exposed to anything related with US and China on trade partnership or even TPP, also affected with Japan and South Korea on military cooperation.
“We will look further on Trump win and its interconnectivity with the fed especially about their monetary policy. We will make more option, so that Indonesia will be less vulnerable on US market progress. We will maintain also our growth driver,” she added.
Muliaman added, the capital market was surprised on the US election resulted but after they hear Trump’s winning speech market confidence back and yesterday move in the positive territory.