Bank Indonesia (BI) Governor Perry Warjiyo at the Finance Track side event of the Indonesian G20 Presidency in Jakarta on Thursday (February 17, 2022). ANTARA/Agatha Olivia
Hence, G20 members jointly formulate a normalization policy for developed countries and how developing countries can prepare in overcoming themNormalization of policies that are calibrated, planned, and communicated properly should be conducted by all developed and developing countries, Bank Indonesia (BI) Governor Perry Warjiyo stated.
"Hence, G20 members jointly formulate a normalization policy for developed countries and how developing countries can prepare in overcoming them," Warjiyo remarked at the Finance Track side event of the Indonesian G20 Presidency here on Thursday.
According to Warjiyo, the global economy will continue to recover and grow 4.4 percent in 2022, not only in the United States and China but also in Europe, Japan, India, and other countries.
Thus, some central banks, such as the Fed, had begun to normalize and raise their policy interest rates to exit the inflation surge that hit the US, which means it would contribute to risks globally.
BI projected that the Fed would raise policy interest rates four times, while the market projected five times.
On the other hand, there is still an increased risk of COVID-19 cases due to the Omicron variant as well as supply and energy disruptions.
Hence, Warjiyo stated that three steps were necessary for addressing these risks, with the first being the need for normalizing policies, especially from developed countries, to be done through proper calibration, plan, and good communication.
"We see the Fed's normalizing and the policy interest rate hike plan. In this case, the market can understand and before the Fed interest rate rises, we see a rise in the US bond interest rates, as it is reflected in the global interest rates, including Indonesian bonds and rupiah exchange rate developments," he elaborated.
Furthermore, the second step was to strengthen the resilience of emerging market countries, including Indonesia, so the normalization from developed countries can still support domestic economic recovery and stability.
Hence, the national and central bank policy mix is necessary for addressing these conditions, he added.
The third step that can be taken is cooperation among world central banks, such as through bilateral currency swap agreements and using more local currencies for bilateral transactions in trade and investment promotion.
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