Call for synchronisation
INDONESIA'S government and central bank need to synchronise interrelated policies to reduce the volatility of the rupiah amid uncertain economic situations after the US Federal Reserve's decision to delay an interest-rate increase, scholars said.
“The rupiah will continue slumping because of weak synchronisation between the government and Bank Indonesia,” said Latif Adam, an economist at the Indonesian Institute of Sciences (LIPI). For example, Latif said, when the central bank decided to raise minimum down payments for housing credit, or loan to value (LTV) and financing to value (FTV), then at the same time the government should have increased the value-added tax on luxury goods, known in Indonesia as PPnBM.
“Even though the government has immediately reviewed its policy on PPnBM, such an unsynchronised approach to policy has created a negative perception … that has hampered [the] monetary and capital market sectors,” Latif said. He said the Fed’s decision built market perceptions that the US central bank was still planning to increase its interest rates, adding that the situation could trigger massive purchases of US dollars .
