JAKARTA, Oct 19 — Indonesia’s central bank governor on Wednesday said he saw no need for aggressive monetary tightening, while cutting the 2022 inflation outlook, in comments a day ahead of the conclusion of a monthly monetary policy review.
Governor Perry Warjiyo told a seminar hosted by parliament that Indonesia’s inflation, at 5.95 per cent in September and the highest since 2015, was still below price pressures seen in other countries.
He reiterated that Bank Indonesia (BI) did not need to raise rates as aggressively as the United States’ Federal Reserve or other central banks.
“Our inflation is lower than those in other countries, so BI does not have to raise interest rates aggressively,” Warjiyo said.
BI has raised policy rates by a total of 75 basis points so far this year and economists polled by Reuters expect another 50 bps increase on Thursday to ensure inflation returns to the two per cent to four per cent target range amid a weakening rupiah currency.
Inflation in Southeast Asia’s largest economy had spiked after the government raised subsidised fuel prices in September.
Warjiyo said BI has revised down the end-2022 headline inflation outlook to 6.3 per cent, from 6.6 per cent to 6.7per cent previously.
Core inflation was now expected to peak at 4.3 per cent at around year-end or early 2023, compared with 4.6 per cent under the previous forecast.
Inflation will go down to about 3.5 per cent to 3.6 per cent by the third quarter of next year and further decelerate to three per cent by the final three months of 2023, he said.
The governor also spoke about the need to reach a balance between maintaining macroeconomic stability and supporting economic growth.
Finance Minister Sri Mulyani Indrawati told the same seminar that the government would strive to maintain Indonesia’s position as a relative economic ‘bright spot’, amid risk of a global recession next year.
Pointing to fears of global stagflation, food insecurity and rising market volatility, the minister vowed to use fiscal instruments to respond to turbulence.
“We have to remain vigilant because we have to maintain this bright spot,” Sri Mulyani said.
“Coordination between fiscal and monetary policymakers will be intensified because the challenges have now shifted to the financial sector,” she said.
— Reuters
