Fixed Income Update 03 Oct 2024
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 3 October 2024
Finding The Equilibrium : Balancing The Demand, Labor Market and Economic Growth
Anchoring inflation at 2% remains the Fed's benchmark in driving a balance between demand, the labor market, and economic growth. Looking ahead, the Fed will continue to adopt a cautious and data-dependent approach in assessing economic developments and determining policy responses. In his latest speech, Powell indicated that the Fed would remain cautious, with a potential Fed rate cut of only 25 bps at the upcoming FOMC meeting.
Five consecutive months of deflation and three straight months of contraction in the Manufacturing PMI have raised concerns about a decline in consumer purchasing power. The deflationary moments provides headroom for BI to lower the interest rate along with The Fed, but at the same time, the reduced likelihood of a Fed rate cut and rising tensions in the Middle East have sparked worries about negative sentiment in Indonesia’s financial markets over the past week. This comes amid a "wait and see" stance among market players as the cabinet reshuffle approaches in the next two weeks.
Regards,
Fikri C Permana - KBVS Research Team