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Fed jitters lead Indonesia to focus on stability over growth
[JAKARTA] Indonesia needs to focus on stability over growth amid the prospect of US interest rate increases, with no easy solutions to current economic conditions, its finance minister said.
Most of the impact of a potential US rate rise already has been priced in, though market jitters are likely, Finance Minister Bambang Brodjonegoro said in an interview Thursday in Jakarta, hours ahead of the Federal Reserve decision. Current official interest rates, which Bank Indonesia left on hold earlier Thursday, are good for stability, he said, a month after saying there was a window for a cut this year to help the economy.
Mr Brodjonegoro is struggling to revive an economy growing at its slowest pace since 2009, with the rupiah having fallen more than 14 per cent this year to be Asia's second-worst performing currency. Policy makers need to protect macro stability in preparation for Fed moves, Brodjonegoro said.
"I don't think there's an instant solution for the current condition," Mr Brodjonegoro said in his office. "Our focus now is more on the stability of the economy while trying to use any possible instrument, especially investment and government spending, to promote some economic growth."
The Federal Reserve will release its policy statement at 2 pm Thursday in Washington, with 54 of 113 economists surveyed by Bloomberg predicting some kind of increase. Investors have dialed back expectations for higher rates since China devalued its currency last month, sparking a sell-off in global markets.