Interview： Aggressive interest rate hike by the Federal Reserve has dragged down the recovery process of emerging economies —— Interview with Dundee Ramdani, an economist at Mandiri Bank, Indonesia

　　Xinhua News Agency, Jakarta, October 8th 　Interview: Fed’s aggressive interest rate hike drags down the recovery process of emerging economies — — Interview with Dundee Ramdani, Economist of Mandiri Bank, Indonesia

　　Xinhua News Agency reporter Wang Aona

　　Dundee Ramdani, an economist at Mandiri Bank in Indonesia, said in an exclusive interview with Xinhua News Agency in Jakarta a few days ago that the aggressive interest rate hike by the Federal Reserve led to high imported inflation in emerging economies, which dragged down their economic growth prospects.

　　Dundee said that at present, emerging economies, including Indonesia, are forced to follow the United States to raise interest rates at the expense of their own consumption and investment growth, and Indonesia’s economic growth may slow down next year.

　　"Imported inflation will lead to capital outflows and slower growth in emerging economies. For domestic enterprises, while financing and production costs increase, the contraction of the consumer market will affect the income of enterprises, and the pressure on enterprises to survive will soar under the double impact. " He said.

　　Under the influence of rising energy prices and uncertainties in global financial markets, Indonesia announced on September 22nd that it would raise its benchmark interest rate by 50 basis points to 4.25%.

　　The Governor of Indonesia’s Central Bank, Perry Vajyo, said that it is estimated that by the end of 2022, Indonesia’s inflation rate will exceed the previously set upper limit of 4%. The purpose of this interest rate hike is to reduce inflation expectations and achieve the goal of controlling the inflation rate at 3% and fluctuating by 1% in the second half of 2023.

　　The latest research report of the Bank of Indonesia pointed out that the current high inflation in developed and emerging economies has prompted many countries to adopt more radical monetary policies. The Fed has raised interest rates many times and may continue to raise interest rates aggressively in the future. This move strengthened the US dollar, aggravated the turmoil in global financial markets, and increased the pressure of maintaining stability of local currency exchange rates in emerging markets, including Indonesia.

　　Dundee believes that maintaining exchange rate stability is very important to all countries and is related to the confidence of the outside world in the local currency. The interest rate hike by the Federal Reserve has led to the devaluation of many countries’ currencies, and at the same time, many countries have realized the necessity of "dollarization". At the same time, in addition to the SWIFT system, countries should support the development of other settlement systems to help the economies of emerging economies maintain stability.