Fixed Income Update 19 Sep 2024
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 19 September 2024
No! BI is Not Ahead The Curve, But...
As expected, the Fed Rate was cut during this Sep's FOMC meeting. However, the 50 bps cut was only predicted a few days before the FOMC, driven by deteriorating labor market data and inflation expectations that were relatively lower than before. Looking ahead, the Fed Rate outlook remains highly dynamic. Currently, we assess the likelihood of a 25 bps reduction at each FOMC meeting until the end of 2024. However, several factors will play a crucial role in shaping the Fed Rate trajectory. These include political developments in the US, particularly in terms of fiscal policy; global geopolitical conditions, especially regarding energy prices; and the labor market and inflation situation (including PCE) in the US.
In line with our expectations, Bank Indonesia (BI) implemented a 25 bps rate cut, marking the first cut since Mar ‘21. Looking ahead, the dynamic global economic landscape, coupled with potential Rupiah volatility, will remain key factors to monitor in assessing future BI rate developments. In addition, domestic inflation will continue to be a critical consideration.
Regards,
KBVS Research Team