Federal Reserve & Bank Indonesia Leave Interest Rates Unchanged at Latest Meetings
It is very interesting to take a quick look at the conclusions drawn at the latest US Federal Reserve meeting (held on 30-31 July 2024), as these conclusions have a big impact on global financial markets, including the Indonesian rupiah rate (and even on monetary policy of Indonesia’s central bank, Bank Indonesia).
After concluding its policy meeting the Federal Reserve decided to leave its interest rate unchanged (which was in line with expectations) but it did seem to make some wider room for a possible rate cut as early as its next meeting (on 17-18 September 2024) amid signs that the US economy is slowing (which would also mean inflation is dragged down). For example, a deterioration in US labor-market conditions was observed, with moderating job gains and modestly rising unemployment (which is currently 4.1 percent, thus at its highest level since February 2018).
Still, the Federal Reserve emphasized that it would not opt for a rate cut until it has gained greater confidence that US inflation is moving sustainably to its two percent year-on-year (y/y) target. And so, it remains far from certain that we will see lower borrowing costs in the US this year. Federal Reserve Chairman Jerome Powell was quoted saying that a rate cut "could be on the table for September2024" but added that monetary policymakers "just need to see more good data."
However, it is true that after the latest news from the US, traders and analysts seem to have rising expectations of an interest rate cut in the USA in September 2024 (one 0.25 percentage point cut).
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