The Direction of the Global Financial Market will be Influenced by the Fed's Policies

Illustration (Photo: Doc. Antara)

JAKARTA - Bank Mandiri economist Reny Eka Putri said that global financial market movements will be influenced by the Fed's decision to keep interest rates stable at 5.5 percent at yesterday's FOMC meeting and the plan to cut interest rates three times in 2024.

The Fed's decision is in line with market expectations.

"The Fed sees that the latest US indicators show that economic growth has slowed, the increase in employment has slowed but remains strong, and the unemployment rate remains low," she said in a statement received by VOI, Thursday, December 14.

Reny said that the US banking system is healthy and resilient.

And tighter financial and credit conditions for households and businesses will likely weigh on economic activity, employment, and inflation so that the FFR is maintained.

Previously, the Fed had raised interest rates 11 times since March 22, which was the fastest pace of tightening since the early 1980s.

Looking ahead, the Fed is seeking maximum employment and inflation of 2 percent in the long term by cutting interest rates at least 3 times to 4.75 percent in 2024.

"If you look at the latest market response, the dollar index and US treasury yields fell after the FOMC decision," she explained.

The dollar index fell to 103.2, its lowest level in the past week, and the yield on the 10-year US Treasury bond also fell below 4.1 percent, the lowest since early August 23.

Reny said that this development is also expected to be a positive catalyst for the Indonesian financial market in today's trading, which will allow the rupiah exchange rate to appreciate against the dollar, reduce bond yields, and increase the domestic stock market, while waiting for the release of trade balance data.

"We predict that USD/IDR has the potential to strengthen in the range of IDR 15,495-IDR 15,575 in today's trading," she explained.