Mandiri Sekuritas Economist Projects Fed Interest Rates Will Drop by 50 Bps

Economist Mandiri Sekuritas Rangga Cipta (Photo: Aris Nurjani/VOI)

JAKARTA - PT Mandiri Sekuritas revealed that the United States (US) central bank, the Federal Reserve, is projected to cut the Fed Fund Rate (FFR) benchmark interest rate twice, each by 25 basis points (bps) in the second semester of 2024.

Mandiri Sekuritas Chief Economist Rangga Cipta said that in the future there will be many signs of economic weakness in the US which is in line with market expectations that the Fed will cut interest rates in September.

"Well, from the public, we see that maybe in the second semester there could be a cut of 2 times, 25bps. But indeed, looking at the latest developments, the risk is for the Fed to cut more and faster," said Rangga in the Economic and Market Outlook, Wednesday, August 7.

However, Rangga said that the Fed's benchmark interest rate cut will still be overshadowed by the ongoing change of leadership in the US.

In addition, according to Rangga, if there is a change of government, it will lead to a change in policy, so there is a chance for a fairly large fiscal stimulus to maintain the momentum of economic growth.

"This is important because one of the sources of US economic growth is the still large stimulus, if the winning candidate in the US will still maintain this aggressive fiscal stimulus, it means that the momentum of economic growth in the US will remain high," said Rangga.

Rangga said that the Fed's benchmark interest rate cut was indeed full of uncertainty because, at the end of last year, the market expected that the Fed would lower the benchmark interest rate 6-7 times.

However, Rangga said that along with the positive growth of the US economy, these expectations had to be revised downwards. In fact, it had caused the rupiah exchange rate to plummet against the US dollar.