Bank Indonesia anticipates capital outflow ahead of FOMC

Jakarta (ANTARA News) – Bank Indonesia said it will increase supervision and mitigate capital outflow that could reduce the rupiah value ahead of the Federal Open Market Committee (FOMC) meeting on June 14 this year.

The central Bank would determine a policy to stabilize the financial market including control rupiah exchange rate and steps to forestall the pressure throughout 2018 at a meeting of its Board of Governor on May 30, the new Governor of the Central Bank Perry Warjiyo told reporters here on Monday.

The additional meeting of the Board of Governor of Bank Indonesia is held ahead of the meeting of FOMC of The Federal Reserve or only two weeks after the Indonesian Central Bank raise sits benchmark interest rate by 25 basis points to 4.5 percent on May 17.

Global financial market players expected The Federal Reserve would raise its Fund Rate 3-4 times this year including the second in June, Perry said.

Perry said the pressure of foreign capital outflows that would weaken rupiah would still shadow the domestic financial market.

The pressure of capital outflow would also come with the improvement of the U.S. economic data and from the expansive U.S. fiscal policy which raises the yield of U.S. 10-year treasury bill.

Perry, who took over as new Governor of Bank Indonesia only on May 24, 2018 has repeatedly pledged to adopt a preemptive policy and to remain ahead of the curve.

“Our short term focus through monetary policy is to stabilize exchange rate,” he said.

Perry also pledged to shortly issue a macroprudential policy through relaxation of House Ownership Credit. This year Bank Indonesia predicted the countrys economy would grow 5.2 percent year-on-year.

On the same occasion, Finance Minister Sri Mulyani Indrawati said the government and Bank Indonesia and other members of the Financial System Stabilization Committee (KSSK) are ready to adopt a firm policy to anticipate external pressure that could disrupt economic stability.

The Finance Ministry also said it will coordinate with Bank Indonesia in the state bond market to keep the yield of bonds at a rational level.

“All components of KSSK will increase alertness and we would not hesitate to act,” the minister said.

Source: ANTARA News