Jakarta (ANTARA) - The US Federal Reserve’s benchmark interest rate hikes have made it difficult for developing countries to recover from the COVID-19 pandemic, Bank Indonesia (BI) Governor Perry Warjiyo has opined.



"Developing countries must overcome the impact of global growth, uncertainty, and the effect of the interest rate increases on capital flows," Warjiyo said at the BI "Leader's Insight" public lecture here on Monday.



In addition, the Fed's benchmark interest rate hikes have also limited the ability of developing countries to formulate policies for encouraging economic growth, he highlighted.


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Therefore, the normalization of monetary policy is one of the issues raised and discussed at the 2022 Indonesian G20 Presidency, he said.



According to Warjiyo, monetary policy normalization in developed countries should be well-calibrated, well planned, and well-communicated.



All of the efforts must be conducted so that the impact of policy normalization on the global economy and developing countries can be mitigated properly, he said.



Furthermore, policy normalization in developed countries has begun and is likely to be done faster than in other countries, he added.



"We have already seen that the Fed has started raising rates. We initially expected that there would be five hikes, but with the high inflation and rapid economic growth, it is likely the US central bank to (increase the benchmark interest rates) seven times, like this month," Warjiyo said.


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The hikes in interest rates by Fed would have an impact on global rate hikes and perceptions of global risk.



Hence, he said, policy normalization is presenting a challenge amid unbalanced economic growth in countries.



In addition to policy normalization, countries are facing other challenges, such as the prolonged impact of the pandemic and the Russia-Ukraine conflict, he added.

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Translator: Agatha V, Kenzu T
Editor: Fardah Assegaf
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