BI estimates the Fed's interest rate will be at 5.25 percent until 2024

Previously, we predicted that it would fall by the end of the year, but apparently it probably won’t. In fact, next year it will still be 5.25 percent

Jakarta (Armfalcon.com) – Bank Indonesia (BI) predicts the United States (US) central bank’s benchmark interest rate The Federal Reserve (The Fed) will remain high at 5.25 percent until 2024.

“baseline we are still using 5.25 percent, peaking in May. Previously, we predicted that it would fall by the end of the year, but apparently it probably won’t. In fact, next year it will still be 5.25 percent,” BI Governor Perry Warjiyo said in Jakarta, Tuesday.

According to Perry, there are two factors that the Fed considers regarding its benchmark interest rate, namely inflation which is still high and financial system stability.

In terms of inflation, the Fed’s worries are also compounded by the plans of the Organization of the Petroleum Exporting Countries and their allies or OPEC+ to cut their production. This has the potential to increase inflation from the supply side.

Meanwhile, the stability of the global financial system is also in a vulnerable condition following the failure of three banks in Silicon Valley.

“Later we will see whether the Fed will consider high core inflation more than the stability of its financial system or balance the two. On balance, maybe baseline at 5.25 percent,” Perry said.

On the same occasion, Bank Indonesia Senior Deputy Governor Destry Damayanti explained that these two considerations would make the Fed less aggressive in raising interest rates.

This was reflected in The Fed’s US dollar index (DXY), which continued to decline to the level of 101 when compared to the bullish or strengthened to touch the level of 110.

“Then, we see the US bond yields for 10 years now at the level of 3.6,” explained Destry.

Destry added that this condition will have a positive impact on developing countries, especially Indonesia, because the pressure on regional currencies will decrease.

For this reason, although Indonesia needs to remain alert to ongoing uncertainties, BI is optimistic that the current conditions are quite good.

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source: www.antaranews.com

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