Emerging Market Must Always Maiantain Stability

Jakarta, Sept 5 (Antara) - Emerging markets must at all occasions maintain economic stability and refrain from spontaneously lowering interest rate as developed nations do when economic growth slows down, Bank Indonesia Deputy Senior Governor Mirza Adityaswara cautioned. "Anyway, emerging markets largely depend on foreign currency transactions. Therefore, to maintain economic stability, we require prudent monetary policy. We cannot follow Europe, Japan, the United States, who can lower their interest rates when their economic growth slows down," he said here on Friday. Mirza noted that emerging markets and developed nations have difference in terms of currencies. Developed nations have international currencies, which give them an advantage. Emerging markets, which have no luxury with their currencies, must keep the balance between foreign confidence and domestic economic stability, he pointed out. With the European Central Bank (ECB) proceeding with quantitative easing, emerging markets still can expect foreign investment inflow from European investors who seek high returns on investment. "Many conditions, however, have to be fulfilled by the emerging market, including maintaining macroeconomic stability and formulating good economic policy because the foreign investors have many choices. They can invest in the Philippines, Malaysia, India, or Indonesia," he said. On Thursday, the ECB unexpectedly had decided to cut all its interest rates by 10 basis points to 0.05 percent from 0.15 percent previously and buy assets in the non-financial private sectors to prevent deflation. The ECB had also slashed its overnight rate on bank funds deposited in the central bank to -0.2 percent from -0.1 percent.