Independent Economist Sekuritas Predicts BI Pangkas BI-Rate 25 Bps At The End Of The Year

Illustration (Photo: Doc Antara)

PT Mandiri Sekuritas projects that Bank Indonesia (BI) will cut its benchmark interest rate once in the fourth quarter of 2024 by 25 basis points (bps).

Mandiri Sekuritas Chief Economist, Rangga Cipta said there is still a greater chance of cutting if the United States (US) experiences a recession or hard landing in 2024.

"Next year we expect BI to cut bigger, because earlier the rupiah had a more significant strengthening space," he said in the Economic and Market Outlook, Wednesday, August 7.

Rangga explained that some of the economic data announced by the US showed a slowdown so that market expectations that the previous Higher for Longer policy had now turned into a recession that might occur.

Thus, Rangga said the US economic slowdown provided fresh air for global interest rates.

Therefore, he projects that the central bank of the United States (US) Federal Reserve is projected to cut the Fed Fund Rate twice, each with 25 basis points (bps) in the second semester of 2024.

Rangga Cipta said that in the future there will be many signs of weakening the economy in the US in line with market expectations that the Fed will cut interest rates in September.

"Well, from the community, we see that maybe in the second semester we can cut it twice, 25bps. But indeed seeing the latest developments the risk is for more Fed cuts and faster," said Rangga.

In addition, Rangga conveyed on the expectations of cutting the Fed's open benchmark interest rate predicting that the rupiah exchange rate against the US dollar will also increase.

Rangga Cipta said that the movement of the rupiah still relies heavily on the expectations of cutting the Fed Fund Rate, which is predicted to be cut during the second semester of 2024.

"If we look at this side, the greater the hope of cutting the Fed interest rate, this should be good for the rupiah. So we can see that maybe in the second semester the rupiah should be stronger. We see that in the third quarter, maybe the rupiah could strengthen lower by Rp. 16,000, maybe in the range of Rp. 15,900," said Rangga.

Rangga assessed that the three aspects of policy that are BI's focus can be fulfilled properly, namely, stable rupiah exchange rates, maintained inflation, and economic growth that achieves the target.