BI Board of Governor's Meeting, February 2018

Febrio Kacaribu (febrio.kacaribu@lpem-febui.org), Alvin Ulido Lumbanraja (alvin.lumbanraja@lpem-febui.org) and Denny Irawan (denny.irawan@lpem-febui.org)
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Febrio Kacaribu: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)
Alvin Ulido Lumbanraja: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)
Denny Irawan: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)

No 201802, LPEM FEBUI BI Board of Governor Meeting Brief from LPEM, Faculty of Economics and Business, University of Indonesia

Abstract: Better-than-expected US employment figures and strong GDP growth have raised concern among market participants of faster pace of interest rate hike in the US in 2018, which led to portfolio capital outflow from emerging market and riskier assets in the last month. As US labor market will remain tight, which pushes wage and inflation higher, we expect downward pressure on Rupiah to continue in the next few months. Bank Indonesia, on the other hand, still faces weak domestic demand, as evidenced by below-5% consumption growth in Q4 2017 and record-low core inflation. Given the prospect of stubbornly low core inflation for the rest of 2018, Bank Indonesia may want to hold its policy rate for now, even in the face of increasing external pressure to increase interest rate.

Keywords: gdp; —; economic; —; economic; outlook; —; inflation; —; macroeconomics; —; interest; rate (search for similar items in EconPapers)
Date: 2018-02, Revised 2018-02
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