Jakarta Composite Index Surges Amid Fed’s First Rate Cut Since Pandemic
Jakarta. The Jakarta Composite Index (JCI) rose in early trading on Thursday, despite a dip in U.S. markets. Wall Street's decline followed the Federal Reserve's decision to cut interest rates for the first time since the Covid-19 pandemic began.
As of 09:12 a.m. Jakarta time, the JCI climbed 68.7 points (0.88 percent) to 7,898.
The Federal Reserve reduced its benchmark rate by half a percentage point, or 50 basis points, to a range of 4.75 percent to 5 percent. This marked the first rate cut in four years as the Fed shifted its focus to strengthening the US job market, which has shown signs of slowing.
Despite the Fed's move, US stock indexes saw slight declines on Wednesday. The S&P 500 slipped 0.3 percent, while the Dow Jones Industrial Average dropped 103 points, or 0.2 percent. The Nasdaq Composite also lost 0.3 percent.
"The question that haunts market participants is whether the rest of September will be characterized by a wave of consolidation, which fits September's history as a difficult month for the stock market," NH Korindo Sekuritas stated in its research on Thursday.
Inflation in the US has fallen from a peak of 9.1 percent in mid-2022 to 2.5 percent in August 2024, close to the Fed's 2 percent target.
Federal Reserve Chair Jerome Powell expressed optimism about the progress on inflation. “We’re not saying, ‘mission accomplished,’ but we’re encouraged by the progress we have made,” he said.
The Fed also signaled potential additional rate cuts in November and December, with more expected in 2025 and 2026. Powell added that the US economy remains in a strong position, and the rate cuts aim to maintain that stability.
In a surprising move, Bank Indonesia (BI) cut its benchmark interest rate by 25 basis points to 6 percent on Wednesday, following a review of inflation forecasts and the strengthening rupiah.
Bank Indonesia predicts the Fed will lower its benchmark rate three times in 2024 as inflation nears the Fed’s medium-term target of 2 percent, amid slowing economic growth and rising unemployment.
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