Powell Cs Will Be Aggressive in Raising Interest, What Will It Affect Indonesia?

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Jakarta, ONENEWS.MY.ID – World financial markets were gray after Jerome ‘Jay’ Powell, Governor of the Central Bank of the United States (US) gave the latest signal regarding the direction of monetary policy, especially the benchmark interest rate.

In the minutes of the meeting or the minutes of the meeting of the US central bank (The Federal Reserve / The Fed) December 2021 edition, Powell said the labor market was very tight and inflation continued to rise. The Fed seems to have to raise its benchmark interest rate sooner.

“The meeting participants generally noted that it was impossible to avoid an increase in the benchmark interest rate sooner than previously thought. Several meeting participants also noted that it was time to reduce the balance sheet after the increase in the Federal Funds Rate,” said the minutes.

The market reacted immediately. Citing CME FedWatch, the probability of an increase in the benchmark interest rate in the March 2022 edition of the Fed’s Policy-Making Committee (FOMC) meeting reached 64.1%.

“Indications the Fed is increasingly concerned about inflation will create the view that it will tighten policy aggressively in 2022. More hawkish than expected,” said David Carter, New York-based Chief Investment Officer at Lenox Wealth Adivisors.

An increase in the benchmark interest rate will increase the yield of fixed income instruments such as bonds. As a result, capital flows left the stock market and landed on US government bonds.

No doubt, the US stock market, the three main indexes fell. The Dow Joes Industrial Average (DJIA) tumbled 1.07%, the S&P 500 lost 1.94%, and the Nasdaq Composite tumbled 3.34%. The Nasdaq posted its worst daily correction since February last year.

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