The Fed Pangkas Suku Bunga, Sri Mulyani: The Next Step Is Still Challenging

Minister of Finance Sri Mulyani (Photo: Antara)

JAKARTA - Finance Minister Sri Mulyani Indrawati hopes that cutting the interest rate of the US Central Bank or the Federal Reserve (the Fed) can have a positive impact on developing countries, including Indonesia.

It is known, at a meeting of the US Central Bank Policy Meeting (FOMC) on 17-18 December 2024, the Fed decided to cut its benchmark interest rate rate by 50 bps to 4.75-5 percent.

"That is a step (The Fed) that has been anticipated. Of course, the impact on the economy is expected to be positive, both on the US economy but also on the whole world, because the higher for longer is indeed one of the factors that has a very big impact on economic performance in developing countries," Sri Mulyani said quoting Antara.

Even though the Fed's interest rate fell, during a plenary meeting, Sri Mulyani said that the global economy in the future would still be challenging.

Global economic volatility is still haunted by China's economic slowdown, the sluggish European economy to US political economic policies after the general election.

"The future step is still challenging, it still has potential that creates volatility in financial markets and global capital flows that create risks, especially for emerging market countries," he said.

As for 2025, the Fed projects interest rates to be at the level of 3.4 percent, indicating a 100 bps cut or 1 percent cut, while by 2026, interest rates are expected to fall to 2.9 percent or cut to 50 bps.

Meanwhile, at a press conference on the results of the Meeting of the Board of Governors (RDG) of Bank Indonesia (BI) last Wednesday (19/9), BI had lowered the benchmark interest rate or BI-Rate by 25 bps to 6 percent. The deposit facility interest rate and lending facility rate also decreased by 25 bps to 5.25 percent and 6.75 percent, respectively.