"The impact of 9.1-percent inflation in June, which was responded to by the Fed's aggressive hike in interest rate, will obviously affect the global economy," she remarked at a press conference on the state budget performance and facts (APBN KiTa) here on Wednesday.
Inflation in the US, which jumped to 8.4 percent and then rose again to 9.1 percent, was the basis for the Fed’s move to raise the benchmark interest rate for monetary tightening, the minister said.
According to Indrawati, the surge in inflation in the US itself was triggered by the increase in prices of energy commodities such as oil, gas, and minerals, as well as food.
Historically, whenever the US has increased the benchmark interest rate aggressively, such as in 1974 and 1980, financial crises have been witnessed in emerging economies, she pointed out.
Therefore, the current risk is being monitored by various institutions such as the International Monetary Fund (IMF) to observe the vulnerability of developing and emerging countries, Indrawati said.
Furthermore, this heightened volatility has also raised the potential for declining performance of countries around the world, she added.
Even after the hike in the benchmark interest rate, the US is facing the risk of recession, with the probability of recession pegged at 40 percent by Bloomberg, Indrawati noted.
"Those who face the dilemma of rising inflation and monetary tightening that are causing economic weakening, they are also facing the possibility of a recession," she said.
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Translator: Astrid H, Kenzu T
Editor: Suharto
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