BANGKOK--Two things on the Indonesian central bank's radar ahead of its next meeting are oil prices and the Federal Reserve.
As of now, Bank Indonesia is expecting the Fed to hike in December, Gov. Destry Damayanti said Thursday on the sidelines of the International Monetary Fund-World Bank Group meetings in Bangkok.
But it will be keeping a close eye on the market impact from the U.S. central bank's meeting on Oct. 27-28--a week after its own rate decision--closely.
A shift in rate differentials could weigh on the appeal of Indonesia's currency and bonds, but Destry sounded confident that the investment incentives BI has rolled out could maintain the attractiveness of Indonesian assets.
Foreign investors soured on Indonesia this year, in part due to broader risk-off sentiment dimming the appeal of emerging markets but also because of investability and transparency concerns raised by credit agencies and index providers.
Market regulators in Southeast Asia's largest economy have since taken steps to address those issues, while BI expanded measures to attract foreign inflows and deepen liquidity.
On the macro front, Destry cited volatile oil prices as the main downside risk to Indonesia's economy. Sticky global inflation and higher interest rates are also a headwind, but Destry noted that Indonesia isn't in the same fiscal bind as other countries with bigger debt loads and deficits.
Expansive social programs and ramped-up fiscal support to buffer against rising living costs have stoked concern about the risk of Indonesia's fiscal discipline unwinding. A recent change of finance minister ruffled some feathers, but the selection of Suahasil Nazara--an experienced technocrat with a solid track record--has soothed some worries about erratic policymaking, analyst say.
On Thursday, Destry noted that top government officials--including the finance minister--have said they will stick to the rule limiting Indonesia's budget deficit to 3% of gross domestic product.
Fiscal policy communication is getting much better, she said, and coordination with monetary policy has improved, describing economic fundamentals as "still solid".
Destry has only spent a few months at the helm of the central bank of Southeast Asia's largest economy, but with seven years in the BI's ranks under her belt, she has an idea of what she wants her legacy to be: impactful, inclusive, integrated, and synergy.
When Destry took the reins after the surprise resignation of her predecessor, Perry Warjiyo, She inherited a complex set of economic challenges, headlined by the energy shock that has forced many central banks--including BI--to tighten policy settings.
Her appointment was widely welcomed by analysts as signalling continuity--a valuable message to send amid concerns about Indonesia's economic trajectory.
Facing risks at home and abroad, and tasked with an expanded mandate that includes growth, the job of being BI governor has rarely looked more difficult.
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