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BI predicts a one-time rise in Fed Rate this year due to Brexit
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Brexit caricature. (-/-)
B
ank Indonesia (BI) forecasts that the US Federal Reserve (the Fed) will increase its Fed Fund Rate (FFR) only once in 2016, following the strengthening of the US dollar as an impact of the UK’s decision to leave the EU, referred to as Brexit.
"Amid the improving US economy, the dollar has strengthened as a result of Brexit, which lowers the chances of a steep increase in the FFR. So we expect it to rise only once at end of 2016," BI executive director of communications Tirta Segara said in Jakarta on Thursday.
However, he explained that the central bank projected the global economy in the next few months to grow slower than expected due to increased uncertainty following Brexit. Slower growth will mainly occur in countries with strong ties with the UK and the EU.
"Economic growth in China and India, which have quite big portions of exports to the region, are expected to grow less than previously projected," Tirta went on.
At home, he explained, the impact of Brexit on the rupiah would be limited, as indicated by the 3.4 percent month-to-month appreciation in June to Rp 13,213 to the dollar.
"The rupiah appreciation is supported by a positive perception on the part of investors over the domestic economy outlook, as well as the implementation of the tax amnesty, an improvement in macro-economic conditions and the delayed FFR increase," Tirta said. (ags)
