Fithra Faisal, a senior economist from Samuel Sekuritas, is back to discuss the economic and political events of the past week and predictions for the coming week.
Firstly, he discusses US politics. Based on recent developments, Donald Trump is highly likely to be re-elected as President. Trump’s tendency to trigger inflation has led the Fed to maintain higher interest rates for a longer period.
Several indications can be seen from the statements of Fed officials and the rise of the U.S. 10-Year Bond from 4.1% to 4.3%, indicating that the Fed is likely to be more hawkish. However, learning from the 2016-2017 precedent when Trump was elected, the “America First” policy tends to boost exports by weakening the US dollar to make exports more competitive. This could be good news for the Rupiah if utilized properly.
Next, he highlights Indonesia’s economic foundation. Recently, there was an announcement of a trade surplus for the 50th consecutive time, amounting to 2.39 billion USD. Although this surplus is thinner than the consensus estimate of 2.9 billion USD, it still demonstrates the strength of Indonesia’s economy. There is pressure on the Rupiah despite positive foreign sentiments.
Fithra Faisal also discusses political developments in the US. After the incident that triggered the possibility of Trump’s re-election, there was a disruption in the Democratic Party. Biden stepped down, and there is a possibility that Kamala Harris will run against Trump. However, he believes Trump will be re-elected because Kamala Harris has a short amount of time and Democrats are not confident in her electoral effect.
Bank Indonesia maintained its interest rate at 6.25%. Although there was an opportunity to raise it in July, the substantial foreign exchange reserves of 140 billion USD were a reason to keep the rate at 6.25%. However, there is a chance for an increase in August to capitalize on positive momentum.
Furthermore, there was the inauguration of three deputy ministers, including Deputy Minister of Finance Mr. Thomas Jewandono. Despite market concerns, a smooth transition between the current administration and the future government can calm the market. The market remained relatively calm with the IHSG staying positive, ranging from 7175 to 7450, with potential strengthening in the coming weeks.
In the bond market, developments were quite good despite the Fed being somewhat hawkish. The market remains bullish with yields potentially falling from 7.1% to 6.9% or even 6.8%. Therefore, Sam
