Inflation and High Interest Rates

Global inflationary pressures are still high. Central banks raised interest rates again. There may be a global recession and Indonesia must adapt.

Indonesia’s economy itself is currently still growing quite well, supported by high consumption and commodity prices. With inflation still high, at 8.3 percent in the United States, 9.1 percent in Europe and very high in some developing countries such as Turkey and Argentina -- mainly due to high energy and food prices, plus the ongoing Russia-Ukraine war -- the central bank still has to keep raising interest rates.

The US central bank (The Fed) again significantly raised interest rates by 0.75 basis points (bps) to a range of 3-3.25 percent. Because inflation is still high, it is estimated that the Fed will raise interest rates again several times to around 4 percent by the end of 2022 and 4.6 percent in 2023 in order to control inflation in the range of 2 percent.