US Central Bank Expected To Maintain Interest Rates, Rupiah Projected Weakening

US and Rupiah dollars (Photo: dock. Antara)

JAKARTA - The rupiah exchange rate on Thursday, February 1, 2024, is expected to fluctuate again but closed lower against the United States (US) dollar, driven by the US central bank, which is expected to maintain the benchmark interest rate.

Quoting Bloomberg, the Rupiah exchange rate on Wednesday, January 31, the rupiah spot exchange rate was closed lower by 0.02 percent Rp15,783 per US dollar. Meanwhile, Jisdor's rupiah exchange rate closed down 0.04 percent to a price level of Rp15,803 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said the US central bank is expected to keep interest rates unchanged on Wednesday and investors will focus on instructions from Fed Chairman Jerome Powell regarding a possible drop in interest rates in March.

" solid US economic data has led traders to reduce their estimated rate cuts in March to 42 percent, from around 89 percent last month, according to the CME Group's FedWatch Tool (NASDAQ:CME)," he said in a statement quoted Thursday, February 1.

Ibrahim said many analysts expect the Fed's first rate drop will aim to prevent a too wide gap between inflation and the Fed's interest rate, as this will tighten financial conditions more than the Fed plans.

In addition, Treasury yields fell and the dollar weakened after Powell in December indicated that the Fed switched to easing cycles.

Meanwhile, data on Tuesday showed that US job vacancies unexpectedly increased in December while US consumer confidence increased to its highest level in two years in January. In addition, Investors fully expect a drop in interest rates by the European Central Bank in April.

From an internal perspective, the International Monetary Fund (IMF) again maintains the prospect of Indonesia's economic growth for the period 2023 and 2024, which remains at 5 percent. The projected economic growth of the Republic of Indonesia from the IMF was taken based on the assumptions of RI's fiscal and monetary policies.

Previously, the IMF had predicted that the Indonesian economy would be able to grow as expected, even though the global economic projections from various institutions continued to be cut.

Ibrahim said that in January 2024 the IMF also revised the global economic outlook for 2024, from 2.9 percent to 3.1 percent. Many countries continue to show extraordinary resilience, with accelerating growth in large countries in Southeast Asia.

Meanwhile, other Indonesian trading partner countries, namely China, are still projected to grow slowly, where consumption and weaker investment continue to burden activity.

Furthermore, in the European Union region, activity is expected to recover slightly after the challenging 2023, when high energy prices and strict monetary policy limit demand. Meanwhile, the projection of this international institution is in line with the government's target of setting targets at a level that is not much different. The government and economists are also optimistic that Indonesia's gross domestic product (GDP) achievement in 2023 will be able to be above 5 percent. Likewise, the government's target in 2024 which set a target of 5.2 percent. However, both the IMF, the Government and economists continue to pay close attention to developments ranging from geopolitical tensions that increase to fiscal pressures of various countries. For this year, the government has not changed the 2024 economic projection to remain at 5.2 percent in accordance with the assumption that the State Budget. Ibrahim estimates that the rupiah will move fluctuating but closed down on trading Thursday 1 February in the price range of Rp15,760- Rp15,840 per US dollar.