The Fed's Interest Rate Has A Big Chance To Drop In September 2024

US dollar (Photo: dock unsplash)

JAKARTA - The interest rate of the Central Bank of the United States (US) or the Federal Reserve Rate (Fed Rate) has a great opportunity to decline in September 2024.

Director & Chief Investment Officer, Fixed Income, PT Manulife Aset Manajemen Indonesia (MAMI) Ezra Nazula said that indications of a reduction in the Fed interest rate have been seen since the Federal Open Market Committee (FOMC) meeting last July.

"Of course the Fed also doesn't want to cause market volatility, if they already indicate something, they already expect something, that expectation will be realized," he said, quoting Antara.

Indications of the Fed's interest rate cuts in the near future can also be seen in the decline in core inflation in the United States, which is now below the target range of 2 percent.

He said that the core inflation in Uncle Sam's country was still at a fairly high level until the beginning of this year, which was around 5 percent.

However, since April 2024 there has been a significant decline, so now this figure is approaching the level of 1 percent.

Ezra said that the possibility of cutting interest rates caused a positive reaction among market participants. In fact, according to market participants, the probability of cutting is almost 100 percent.

He also said that more than 50 percent of market players with the Fed expectations could cut interest rates by around 25-50 basis points. Market participants have also expected a 4-fold drop in interest rates this year.

Even so, he said that his party chose to be more conservative by considering the Fed's always steps based on the latest data developments, projecting that the cuts were only 3 times this year.

"So, I'm pretty sure that the Fed will lower its interest rates in September, driven by indicators from the service and retail sector that can be said to have sloped," added Ezra.

Previously, the Fed still maintained their benchmark interest rate at the level of 5.25-5.5 percent after the FOMC meeting last July.