"The increase in the Fed fund rate has been predicted . Now the situation of uncertainty is over," BEI President Director Tito Sulistio said.Jakarta (ANTARA News) - The Indonesian Stock Exchange (BEI) said the negative impact of an increase in the interest rate of the US central bank was already expected that the stock market could remains in positive area.
"The increase in the Fed fund rate has been predicted . Now the situation of uncertainty is over," BEI President Director Tito Sulistio said here on Thursday.
He said despite the increase in the Fed fund rate, the investment yield offered in the United States remain zero, therefore, Indonesia could still draw investors with its investment yield.
The Fed decided to raise its fund rate by 25 basis to 0.50 percent as against Bank Indonesia benchmark interest rate (BI rate) of 7.5 percent.
Tito Sulistio hopes that Bank Indonesia would cut its BI rate that the spread is not too wide especially as the countrys inflation is also low this year.
The Central Bureau of Statistics (BPS) said inflation in November was only 0.21 percent that cumulatively inflation in the first 11 months of this year was 2.37 percent .
Year-on-year the inflation in November was 4.89 percent.
Bank Indonesia predicted that the countrys inflation this year is around 4 percent.
"The gap between BI rate and inflation is quite wide at 3.5 percent . Hopefully Bank Indonesia would agree to reduce the gap," Tito said.
Vice President for Research and Analysis Valbury Asia Securities Nico Omer Jonckheere said the government wanted Bank Indonesia to cut its BI rate to help boost economic growth.
"Indeed, it is risky for Bank Indonesia to accept the government request at present as it may trigger capital flight.
"Bank Indonesia, therefore, is expected to maintain its BI rate," Nico said.
Bank Indonesia was to hold meeting of its board of governors to determine its benchmark interest rate.(*)
Editor: Heru Purwanto
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