BI Board of Governor's Meeting, October 2018

Febrio Kacaribu (), Alvin Ulido Lumbanraja () and Syahda Sabrina ()
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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)
Syahda Sabrina: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)

No 201810, LPEM FEBUI BI Board of Governor Meeting Brief from LPEM, Faculty of Economics and Business, University of Indonesia

Abstract: Rupiah took a paradoxical turn within the last month, where continued rapid depreciation was also followed by second monthly deflation in a row, defying conventional wisdom. Muted inflation in face of rapid depreciation might be explained by higher interest rate, which slows down the demand for durable goods consumption, and government’s insistence to hold retail fuel price despite higher international crude oil price. On external side, we still see pressure on Rupiah going forward given persistent current account deficit and continued sign of monetary policy tightening around the world. Given the decrease in inflation, priced-in global shocks in the short run, and potential benefits from the implementation of the negative Tobin tax initiatives, we argue that holding interest rate on Tuesday may be the best course of action.

Keywords: gdp; —; economic; —; economic; outlook; —; inflation; —; macroeconomics; —; interest; rate (search for similar items in EconPapers)
Date: 2018-10, Revised 2018-10
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