Monetary Policy Must Be Aligned in Real-Fiscal Sector

INDUSTRY.co.id - Jakarta - Head of National Development Planning Agency (Bappenas) Bambang Brodjonegoro assess monetary policy should be in line with the real sector and fiscal sector to encourage the economy to grow optimally.

This was conveyed Bambang responded to the policy of Bank Indonesia as a monetary authority called a number of observers less precise lower interest rates in August and September and last from 4.75 percent to 4.25 percent.

"I am reluctant to comment on it, because in my opinion the monetary policy must be in line with the real and fiscal sectors at that time that the monetary authorities have helped to stimulate the real growth," Bambang said in Jakarta on Friday (10/11/2017)

Previously, senior economist from the University of Indonesia Faisal Basri said the policy of central bank interest rate cuts is less precise when it is almost certain that the Fed will increase interest rates in December 2017.

He also said that the decline in the benchmark interest rate also makes the rupiah exchange rate weakening against the US dollar so that the central bank must intervene and consequently the eroded foreign exchange reserves.

Indonesia's foreign exchange reserves at the end of October 2017 recorded 126.5 billion US dollars. The position is lower than the end of September 2017 which amounted to 129.4 billion US dollars.

The decline in foreign exchange reserves in October 2017 was mainly influenced by the use of foreign exchange for servicing of official foreign debt and stabilization of the rupiah exchange rate in accordance with its fundamentals.

In addition, the decline in foreign exchange reserves is also influenced by the decrease in the placement of bank foreign exchange at Bank Indonesia in line with the requirement of payment of foreign currency liabilities.

In August 2017, BI lowered the BI 7-day Reverse Repo Rate from 4.75 percent to 4.5 percent. At the time, the central bank said, declining policy rates are expected to strengthen banking intermediation, thereby strengthening financial system stability and supporting higher economic growth.

A month later, BI again lowered its benchmark interest rate from 4.5 percent to 4.25 percent. BI reiterated that the policy interest rate cut is expected to support the improvement of banking intermediation and ongoing domestic economic recovery. (Ant)