"From the external side, indications that the US central bank, The Fed, will end its interest rate hike campaign this year are clear," he noted in an official statement here Thursday.
"Even though it is still far above the target of two percent, the Consumer Price Index (CPI) inflation in the US continues to trend downward," he pointed out.
He said the Fed would hold its benchmark interest rate at 5.25 percent until the end of 2023 before giving a signal to start making cuts.
It is seen that the Fed will first assess the impact of the aggressive increase in the FFR since 2022 on the condition of the real sector of the US economy, including inflation and the unemployment rate, before considering reducing the interest rates.
This is due to delays in the transmission of the benchmark interest rate to the market, including to the real sector.
"However, the pressure from the market regarding the opportunity of cutting the FFR in the second half of 2023 is increasing as the US banking system continues to be under heavy stress following the collapse of the First Republic Bank,” he stated.
Within the country, Rachman views inflation will continue to decline and reach the target range of two to four percent on an annual basis at the end of the first semester of 2023, or faster than previous estimates.
Meanwhile, the trade surplus began to shrink to US$2.91 billion due to a decline in export performance following the weakening global economic growth.
"Overall, we still estimate that Bank Indonesia (BI) will maintain its benchmark interest rate at 5.75 percent for the remainder of 2023 while remaining wary of future global economic developments that are still full of uncertainties," he remarked.
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Translator: Sanya Dinda Susanti, Katriana
Editor: Rahmad Nasution
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