The United States (US) is considered to be threatened by economic recession. This condition is believed to affect the global economic conditions. Therefore, the government ensures that it continues to monitor developments while preparing anticipatory steps so that the national economy remains stable.
“This is indeed moving. Of course, we are already anticipatory. We will continue to monitor this because we must anticipate the turmoil,” said the Head of the Fiscal Policy Agency of the Ministry of Finance, Febrio Nathan Kacaribu, at his office in Jakarta, Monday (6/8).
The current US economic conditions are below market expectations. The unemployment rate in the United States is higher than expected. That also led to the push for the Federal Reserve (The Fed) to cut interest rates earlier.
The uncertainty of the Fed’s policy is difficult to predict. Because, the market expects Jerome Powell, Chairman of the Federal Reserve, to announce a gradual cut in the Fed Fund Rate since the beginning of this year.
But in reality, the Fed has not cut its benchmark interest rate at all. The latest expectation is that the Fed will cut interest rates once at the end of the year if US economic data is supportive enough.
“Now with the latest data, the probability is that we will see the consensus moving towards more cuts,” said Febrio.
Also read: BI Responds to Signal of Fed Interest Rate Cut
This condition is actually considered to have a positive impact on the Indonesian economy. Because, if the Fed will cut interest rates as currently predicted, then the possibility of foreign capital outflows from Indonesia can be suppressed.
“If the US interest rate is lowered, it will reduce the pressure for capital outflow. This means that domestic interest rates, especially the rupiah, will be attractive to investors, especially portfolios. This is what we must monitor day by day. We must monitor these changes, so that the steps we take can also be good,” explained Febrio.
The US economic conditions and the possibility of a more aggressive Fed rate cut are also considered to benefit the government bond market. This is because Government Securities (SBN) will be seen by investors as attractive.
Moreover, the interest rate on 10-year US Treasury bonds has already fallen to 3.7%. The decline is considered quite sharp in the last few days. The decline in US Treasury bonds interest also helped to drive down the 10-year SBN interest rate to 6.77%.
“We see the dynamics. If it does go down, if they adjust, it will actually have a positive impact on us. That’s what we have to monitor. We manage these dynamics day by day so that what we do actually ensures that this uncertainty does not have a negative impact on us, but we use this to actually improve and create opportunities from our financing structure,” concluded Febrio. (Z-11)
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