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Indonesia ‘Plays Long Game’ to Safeguard Economy

Finance Minister Sri Mulyani Indrawati has said that the government is “playing the long game” to safeguard the country’s economy from external pressures, particularly from the United States Federal Reserve’s hawkish stance on its policy rate.

Following a Federal Open Market Committee (FOMC) meeting on June 13, the Fed has taken a more aggressive stance, projecting two more rate hikes this year and three hikes in 2019.

It is higher than previous projection of one additional rate hike in 2018 and two next year.

Indonesia, which posted a deficit in its current account, faced fiercer competition from other emerging markets in securing an adequate US dollar supply at a time when portfolio investors prefer to place their funds in dollar-denominated instruments in the US, Sri Mulyani said.

By placing their funds in such instruments, investors could see better returns because of the Fed’s plan to hike the rate.

“This is one of the challenges that we have to face in the next nine months,” she said.

Sri Mulyani said Indonesia anticipated an impact from US President Donald Trump’s protection policy, which could force the US economy to deal with retaliatory tariff measures from China, the European Union and Canada over the next one and a half years.

“We are playing the long game. If we [take] countercyclical measures too soon then we may lose such an instrument when we truly need it,” she said. (bbn)

The Jakarta Post

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