Liza Camelia Suryanata, Head of Research at Kiwoom Sekuritas\nIndonesia, stated that the interest rate hike by the US central bank,\nthe Federal Reserve, could accelerate capital outflow from domestic\nfinancial markets. This condition is exacerbated by the US 10-Year\nTreasury Yield reaching approximately 5%.<\/p>\n
As reported, the Fed has raised the Federal Funds Rate (FFR) to a\nrange of 3.75% to 4.0% on Wednesday (16\/9) local time. This move marks\nthe first interest rate hike by the US central bank since July 2023,\nwith signals suggesting this may not be the final increase for the\nyear.<\/p>\n
\u201cHowever, the most decisive factors remain the combination of the\nUS10Y, DXY, the Rupiah, SBN yields, and domestic earnings. If the\nUSD\/IDR breaks 17,700 alongside the 10-year Indonesian Government Bond\n(SUN10Y) exceeding 7.30%, the pressure on Indonesia will become more\nserious,\u201d Liza stated in her remarks on Thursday (1s7\/9).<\/p>\n
Liza explained that the 25 bps Fed rate hike, along with the\npossibility of further increases, remains a burden for the Jakarta\nComposite Index (IHSG). The primary pressure stems from the transmission\nof the US10Y remaining above 5%, the weakening of the Rupiah, and\nmovements in foreign fund flows.<\/p>\n
\u201cUntil the end of the year, I still see the IHSG as volatile with\nmixed-to-negative foreign flows. Kiwoom\u2019s 2026 target remains at\n7,250-7,700, but given current conditions, I am more conservative. As\nlong as it can close in the 7,000 range (the psychological level of\n7,000) up to 7,200, I will not rush an official revision, provided the\nRupiah and sovereign risks remain controlled,\u201d she revealed.<\/p>\n
Nevertheless, Liza noted that domestic investors currently possess\nmuch stronger absorption capacity against foreign selling. However, this\ndomestic liquidity may not be sufficient to fully prevent an IHSG\ndecline if selling is concentrated on large-cap index heavyweights.<\/p>\n
In the short term (1-3 months), the IHSG is predicted to remain\nfluctuant. Pressure could intensify if the Fed raises interest rates by\nanother 25 bps this year to the 4.00\u20134.25% level. Conversely, if US\ninflation and labour data soften, expectations for rate hikes may\ndecrease, improving capital inflows.<\/p>\n
Regarding domestic monetary policy, Liza expects Bank Indonesia (BI)\nto maintain its benchmark interest rate at 5.75% with a hawkish\nbias.<\/p>\n
\u201cIf the Rupiah breaks 17,700-18,000 accompanied by increasing\noutflows, the likelihood of BI raising the rate by 25 bps to 6.00% will\nincrease. Maintaining the BI Rate supports growth and credit, whereas a\nhike helps stabilise the Rupiah and the carry of SBN, but simultaneously\nincreases the cost of capital,\u201d she concluded.<\/p>\n
The IHSG strengthened by 0.40% to 6,462.43 on Thursday afternoon. The\nmarket is now awaiting Bank Indonesia\u2019s response following the Fed\u2019s\nrate hike to 3.75-4.00 percent.<\/p>\n
In a press conference, Fed Chair Kevin Warsh expressed concerns\nregarding inflation, noting that too many product categories are\ninvolved.<\/p>\n
The 25 basis point (bps) increase by the Federal Reserve to\n3.75%-4.00% has the potential to strengthen pressure on the Rupiah.<\/p>\n
US President Donald Trump has urged the Fed to immediately lower\ninterest rates to 1% or lower following the recent increase to\n3.75-4%.<\/p>\n
The Rupiah exchange rate opened weaker by 43 points to the level of\nRp17,739 per US dollar on Thursday (17\/9) following the 25 bps Fed rate\nhike.<\/p>\n
The IHSG closed sharply lower by 4.57% to the level of 7,577 on\nWednesday (4\/3\/2026). A combination of Fitch Ratings revising its\noutlook to negative and Middle East conflicts triggered massive capital\noutflows.<\/p>\n
IHSG stocks plummeted by up to 8 percent after MSCI delayed its\nrebalancing. Economists assess that the panic selling is temporary and\nthe market has the potential to rebound next week.<\/p>\n
Indef researcher Andry Satrio Nugroho stated that although\nIndonesia\u2019s foreign exchange reserves remain within safe limits for\nthree months of imports, investor concerns persist.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/the-fed-interest-rate-hike-could-accelerate-capital-outflow-1789648676", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }