Jakarta, CNBC Indonesia – Bank Indonesia estimates that the Fed will postpone its decision to increase the benchmark Fed Funds Rate. Initially, the interest rate increase will be implemented in the third quarter of 2023, but will be postponed to the fourth quarter of 2023.
For information, on 19-20 September 2023, the US Central Bank, The Federal Reserve (The Fed) will hold the Federal Open Market Committee (FOMC), which is a policy meeting of the US Central Bank board chaired by Jerome Powell. Usually the interest rate decision will be announced after the meeting along with the future direction of monetary policy.
“It was in the third quarter but it looks like it will be postponed to the fourth quarter,” said Director of the Economic and Monetary Policy Department of Bank Indonesia (BI) Erwindo Kolopaking when met in Labuan Bajo, NTT, quoted on Sunday (10/9/2023).
According to BI, the direction of interest rate policy will still be in a high trend over a long period of time or commonly known as Higher for Longer. In this way, uncertainty in global financial markets will remain uncertain.
“This will also encourage uncertainty in the financial markets. Plus now the US fiscal year ends in the third quarter and then there is usually a government shutdown,” said Erwindo.
Previously, BI Governor Perry Warjiyo also revealed that the United States (US) benchmark interest rate would still rise until the end of the year. He estimates that FFR can reach the level of 6% and last until next year. This could be higher than Indonesia if there is no increase.
For information, at the BI board of governors meeting on 23-24 August 2023, it was decided to maintain the BI 7-day reverse repo rate at 5.75%. BI will again announce the direction of its benchmark interest rate policy on September 20-21 2023 or the day after the Fed holds the FOMC.
“Inflation is still high, even in the US now it is still above 4%. Next year until the end of 2024 it will also still be above 2%, so this causes the FFR to possibly be 5.75% this year, it could even be 6% and it is likely that it will still be high throughout 2024, higher for longer “is a global challenge,” he explained.
This is also the reason the United States (US) dollar has strengthened sharply in recent times. Almost all currencies were forced to bend their knees against the US dollar.
“The dollar is the strongest in the world, that’s why the whole world, including us, must really maintain the stability of the NTR, the 4 global characteristics, slowing economy, high inflation, FFR higher for longer and a strong dollar,” explained Perry.
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