BI Boss Reveals There Is Potential For The Fed's Interest Rate Reduction In September 2024

Governor of Bank Indonesia (BI) Perry Warjiyo. (Photo: Doc. ANTARA)

JAKARTA - The Financial System Stability Committee (KSSK) revealed that the potential decline in the benchmark interest rate of the United States central bank, the Federal Funds Rate (FFR), was faster than the initial expectations.

Gubernur Bank Indonesia (BI) Perry Warjiyo menyampaikan semula pihaknya memperkirakan FFR baru akan turun pada Desember 2024.

However, in the July 2024 Board of Governors' Meeting (RDG), it was estimated that the Fed would lower interest rates in November 2024.

"But yesterday's Federal Open Market Committee (FOMC) has the possibility that the Fed Fund Rate will start decreasing in September 2024," he said at the KSSK III Periodic Meeting Results Press Conference in 2024, Friday, August 02.

Perry explained that Europe and England had started lowering interest rates, however, the United States had not yet.

Therefore, his party will see the impact on global interest rates, especially the interest rates of US bonds.

Even so, Perry has not been able to confirm when the BI or BI-rate benchmark interest rate will be lowered.

For information, the BI-rate was at the level of 6.25 percent or increased in April 2024. And in the RDG May to July 2024, BI still maintains its interest rate at the level of 6.25 percent.

According to Perry, by looking at the condition of core inflation which is expected to remain low in the future, BI-rate should be lowered.

However, BI views that the core inflation conditions in July 2024 will be maintained. Core inflation in July 2024 was recorded at 0.18 percent month to month (mtm), higher than inflation in the previous month of 0.10 percent mtm.

"It's just that (BI-rate) hasn't been able to go down because we have to focus on mitigating global risks. So yesterday at the press conference there were several friends asking, what is the movement there (BI-rate decline)? Yes, but indeed we have to make sure the global risk is under control first. Like that, "he said.

Perry explained that his party, in the aftermath of global mitigation, will focus on foreign exchange interventions or investments in foreign exchanges (foreign exchanges), interventions in spots and in foreign exchanges.

In addition, he said, the condition of Indonesia's foreign exchange reserves is still quite safe, although it cannot continue to intervene in foreign exchange.

"So we coordinated with the Minister (financial), namely SRBI with SBN. Yes, because in the first quarter yesterday there was an SBN outflow, if the dollar was 1.82 billion US dollars," he said.