In today’s trading, Thursday (22/9), the Rupiah weakened against the US Dollar. This time, the Rupiah is in the position of Rp 15,030/US$. This figure is the weakest in the last two months. The Fed’s policy of raising interest rates was the main cause of the pressure.
It is known, the US central bank raised interest rates by 75 basis points to 3% – 3.25% and emphasized its aggressive stance. The Fed’s interest rates are now at their highest level since early 2008.
Rupiah weakened only slightly, 0.03% to Rp 15,000/US$. However, the depreciation increased to 0.23% to Rp 15,030/US$ at 9:07 WIB. This level is the weakest since July 22 last.
The aggressive Fed made the US dollar index shoot up yesterday and briefly touched the range of 111.59, the highest since June 6, 2002. This depressed the rupiah. Going forward, the Fed will continue to raise interest rates until inflation returns to 2%.
“The FOMC (Federal Open Market Committee) is very determined to bring inflation down to 2%, and we will continue to do so until the job is done,” said Fed chairman Jerome Powell.
The Fed now sees interest rates set to hit 4.6% (4.5% – 4.75% range) next year. This means that there will still be an increase of 150 basis points from the current level.
In fact, some Fed officials see interest rates in the 4.75 – 5% range in 2023, before starting to fall in 2024.
With high-interest rates, the risk of a recession also increases. Powell doesn’t even give a guarantee of how significant a recession will be if it does occur.
“No one knows if this process will lead to a recession, or if it does, no one knows how significant this year will be,” Powell said.
The world’s most powerful central bank still has two monetary policy meetings this year and is likely to raise interest rates by 75 basis points and 50 basis points. Because at the end of this year, the majority of Fed members see interest rates in the range of 4.25% – 4.5%.
With this aggressiveness, which has made US Treasury bond yields (Treasury) rise, market players are now waiting for a response from Bank Indonesia (BI).
The market consensus is that BI will raise its benchmark interest rate this month. Of the 14 institutions involved in forming the consensus, all of them agreed that MH Thamrin’s camp would raise the benchmark interest rate.
A total of 12 institutions/institutions estimate that the central bank will raise BI7DRR by 25 basis points (bps) to 4.00% while two institutions/institutions project an increase in BI7DRR by 50 bps to 4.25%.