The Fed Expects The Fed To Maintain Interest Rates, Rupiah Is Projected To Strengthen Slightly

Illustration. (Photo: Doc. Antara)

JAKARTA - The rupiah exchange rate on Tuesday, November 21, 2023 is expected to strengthen slightly because in the short term, the focus of the market will return to the minutes of the Fed meeting yesterday, where the interest rate remains stable.

Quoting Bloomberg, the Rupiah exchange rate on Monday, November 20, the rupiah spot exchange rate rose 0.31 percent to Rp15,445 per US dollar. Meanwhile, Jisdor's rupiah exchange rate rose 0.55 percent daily to a price level of Rp15,419 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said investors are now estimating the possibility that the Fed will start lowering interest rates as early as March 2024, although the Fedwatch CME tool only shows a 30 percent chance of the scenario.

"In the short term, the market focused on the minutes of the Fed meeting at the end of October, where the bank kept its interest rates stable and signaled that the bank was likely to maintain higher interest rates for a longer period of time," he explained in his official statement Tuesday, November 21.

However, the Fed is now unanimously expected to no longer raise interest rates, as inflation and weak labor data show that the US economy is slowing down as expected. However, the volume of currency market trading was also set somewhat limited this week, due to the Thanksgiving holiday.

In addition, China's central bank maintains loan benchmark interest rates at record lows, as an effort to encourage local economic recovery.

The bank also injected about 80 billion yuan liquidity into the economy, largely maintaining the rate of injections of cash funds to support growth.

Ibrahim said the market is also optimistic that the projected level of consumption of the people in Indonesia in 2024 will continue to show a high trend, driven by election events that trigger economic activity.

The implementation of the election will drive the economy by triggering domestic spending. Indonesia's economic growth in 2024 will still range from 5-6 percent because people's purchasing power is still strong.

Previously, public consumption in the third quarter of 2023 remained stable, as reflected in supply conditions from the manufacturing sector which continues to be in the expansionary zone with a manufacturing index (PMI) above 50 percent.

Meanwhile, Ibrahim estimates that growth will be positive in all business sectors by 2024, driven by strong household consumption. This means that the Indonesian economy will continue to maintain a positive growth trend, even in the midst of global uncertainty due to geopolitical conflicts and economic slowdowns.

In addition, global economic conditions, which are expected to slow down in 2024, are influenced by strict monetary policy from developed-state central banks, such as the United States, which has maintained high bank benchmark interest rates since 2023.

Ibrahim estimates that the rupiah will fluctuate but close higher on trading Tuesday, November 21 in the price range of IDR 15,400- IDR 15,510 per US dollar.