Currency and commodity observer Ibrahim Assuaibi is optimistic that\nthe US central bank, the Federal Reserve (The Fed), will maintain\ninterest rates. If The Fed maintains its rates, it will have a positive\nimpact on the strengthening of the rupiah.<\/p>\n
The US central bank meeting is scheduled to take place on 16\u201317\nSeptember 2026 to discuss the direction of benchmark interest rate\npolicy. The Federal Funds Rate (FFR) currently stands in the range of\n3.50%\u20133.75%. The last time the FFR was raised was in July 2023 by 25\nbasis points to the 5.25%\u20135.50% level, before eventually entering a\ncycle of holding and reducing interest rates until early 2026.<\/p>\n
Ibrahim noted that many observers believe there is an 85%-90%\nprobability that The Fed will increase interest rates. However, he\nbelieves that Kevin Warsh, the Chair of The Fed, is likely to maintain\nthe current rates during the meeting. He cited Warsh\u2019s statements in\nAugust suggesting that US interest rates are currently too high.<\/p>\n
Nevertheless, during the first week of September, while speaking at\nCongress, Warsh stated that interest rates would be raised if inflation\nremains high. This has served as a reference for economists and\nanalysts, as the prices of essential goods, including energy in the US,\ncontinue to rise. For instance, petrol prices, which were previously\nUS$4.6\u2013US$4.8 per gallon, have risen above US$6 per gallon, impacting US\ninflation. This surge is linked to the intensifying geopolitical\ntensions in the Middle East.<\/p>\n
Ibrahim explained that during periods of high inflation in the US,\nthere were reports that Kevin Warsh might raise interest rates because\nhis deputies suggested it was an appropriate time to do so. However, he\nnoted that US President Donald Trump has intervened, suggesting that\nWarsh should not raise rates but should instead lower them. This\nintervention is why Ibrahim believes the central bank is likely to\nmaintain rates during the Thursday morning meeting.<\/p>\n
According to him, if the central bank maintains interest rates, it\nwill positively impact the future exchange rate of the rupiah, although\nthe strengthening may be limited. Additionally, global gold prices,\nwhich had previously undergone a correction, are likely to strengthen\nagain as the news of maintained interest rates will be responded to\npositively.<\/p>\n
Conversely, if the central bank were to raise interest rates, foreign\nfunds in Indonesia would likely flow back to the US. This would\nnegatively impact the Indonesia Composite Index (IHSG), the rupiah\nexchange rate, and foreign investors withdrawing funds. This is because\nhigher interest rates lead to higher US bond yields, which negatively\nimpacts capital flows.<\/p>\n
Despite the pressure from deputies to raise rates due to high\ninflation, Ibrahim remains optimistic that Kevin Warsh will likely\nmaintain the interest rates during this week\u2019s meeting.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/observer-optimistic-the-fed-will-maintain-interest-rates-here-is-why-1789534440", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }