Jakarta. Finance Minister Sri Mulyani Indrawati expressed optimism that the US Federal Reserve's decision to lower its benchmark interest rate (Fed Funds Rate/FFR) will positively impact the global economy.

The Federal Reserve reduced its interest rate by 50 basis points (bps) on Wednesday, marking the first rate cut since the onset of the Covid-19 pandemic. This move aims to prevent a slowdown in the labor market. Prior to this, advanced economies had been following a high-interest-rate trend, often referred to as "higher for longer."

“Higher for longer has been a significant factor affecting the economic performance of developing countries. So, this rate cut is a step we’ve been anticipating,” Sri Mulyani said after attending a plenary meeting at the House of Representatives on Thursday.

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She added that The Fed's policy must be monitored by all countries. Amid the current global economic uncertainties, the rate cut is expected to benefit both the US and the global economy.

“This is a step that has been anticipated, and its effects on the economy are expected to be positive for both the US and the global economy,” Sri Mulyani explained.

Earlier, Bank Indonesia (BI) Governor Perry Warjiyo predicted that The Fed would lower its interest rate three times in 2024 due to inflation nearing the medium-term target of 2 percent.

These developments have accelerated the likelihood of The Fed enacting quicker and larger rate cuts than originally forecasted. Based on BI's assessment during the Board of Governors Meeting on Sept. 17-18, 2024, BI expects the FFR to be reduced three times in 2024 and four times in 2025.

“Our latest estimates suggest the FFR will decrease by 25 basis points each in September, November, and December 2024. Next year, we foresee four additional rate cuts,” Perry said.

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