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BI boss warning about the era of high interest will be a long time

BI boss warning about the era of high interest will be a long time

Andrianus.my.id -Governor of Bank Indonesia (BI) Perry Warjiyo warned that the direction of the benchmark interest rate with a high level would last a long time. This is due to the increase in the Fed Funds Rate (FFR) which is expected to occur until 2023 with a longer cycle.

"Higher interest for longer, high interest rates and will last a long time," said Perry in a working meeting with Commission XI DPR RI, Monday (21/11/2022).

In the United States (US), the FFR increase this month was 75 basis points (bps) to 4%. Perry mentioned the possibility that in December 2022 it would increase by another 50 bps.

"We estimate that next year there will still be an increase from 4.5% to 5%. Some predict up to 5.25% and the peak may be in the first and second quarters (2023) and will not drop soon. This is the high interest rate for longer, " Perry explained.

The European Central Bank (ECB), said Perry, also continued to raise interest rates. Likewise, the increase in the benchmark interest rate was carried out by the monetary authority in England.

With the increase in benchmark interest rates in many developed countries, Perry said that it is not certain that inflation will decrease. This is because inflation occurs from the supply side of energy and food.

"So there is a catch-up between raising interest rates and high inflation. This is what is often called the risk of stagflation, declining stagnant growth and high inflation," said Perry.

As a result, the term reflation has emerged, namely the risk of recession and high inflation. "Now the terms are reflation, recession risk and high inflation," he said.

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