Bank Indonesia unlikely to adjust its benchmark rate: Nasution

We can see the calculation on its fundamentals."
Jakarta (ANTARA News) - Chief Economic Minister Darmin Nasution has predicted that central bank Bank Indonesia (BI) would not raise its 7-Day Reverse Repo Rate benchmark which is now at 4.24 percent.

"We can see the calculation on its fundamentals. So there is no need to take response in raising the benchmark again," Nasution said in Jakarta on Wednesday.

The chief economic minister said that Indonesia and market players have made predictions with regard to the increase in The Fed benchmark that would take place after the Federal Open Market Committee (FOMC) meeting in March 2018.

For that reason, there is no exaggerated concern over the plan of the Fed`s benchmark rate hike and no reason from Bank Indonesia to follow-up on doing the same.

According to Nasution, the weakening of the rupiah against the US dollar that occurred since early 2018 is also part of the market participants in responding to the Fed`s plan.

"There is no big change, because all have to absorb this and has been calculated since two or three months," said Nasution who is a former Governor of Bank Indonesia.

Earlier, Bank Indonesia Governor Agus Martowardojo said BI`s benchmark rate (BI 7-Day Reverse Repo Rate) policy should not necessarily tighten or rise in March 2018, although the US central bank is almost certain to raise its benchmark interest rate.

One of the reasons is that the current condition of the domestic economic fundamentals is going well, as seen from the control of inflation targeted by the Central Bank at 2.5-4.5 percent year-on-year (yoy).

In addition, although external economic pressures continue to overshadow and disrupt stability, especially the rupiah exchange rate, the exchange rate volatility has not been too worrying.

The Federal Reserve will hold a meeting of the Open Market Committee on March 20-21, 2018. Market participants believe the Fed will raise its benchmark interest rate from the current level of 1.25-1.5 percent in March 2018, and then two to three times on the rest of the year.