Jakarta, CNBC Indonesia – Issue tapering has surfaced again since last week, not just speculation, but was disclosed by the central bank of the United States (US) or known as the Federal Reserve (The Fed).
The Fed’s July monetary policy meeting minutes point to opportunities tapering or a reduction in the value of the asset purchase program (quantitative easing/QE) this year.
Inflation in the US which is said to have reached its target and the recovery in the labor market is also almost as expected, making the majority of board members vote tapering this year.
“Looking ahead, most participants (Federal Open Market Committee / FOMC) noted that as long as the broad economic recovery matches their expectations, it will be appropriate to undertake a reduction in the value of asset purchases this year,” reads the minutes released Thursday (19/19). /8/2021) early morning Indonesian time.
The US dollar immediately shot up, over the past week posting a strengthening of more than 1% and touching the highest level since November last year. The rupiah last week finally posted a 0.45% decline.
Slight weakness, but in retrospect from 2013 to 2015, at the time of announcement tapering, then tapering done, and after tapering, the rupiah fell by 50%.
In June 2013 the Fed, which was then led by Ben Bernanke, issued a discourse tapering QE.
The surprising announcement caused capital outflows from emerging market countries such as Indonesia and back to the United States, which made the US dollar strengthen and the rupiah slump. Global financial markets are also volatile, known as taper tantrum.
The Fed finally started reducing QE by US$ 10 billion per month starting in December 2013, until finally discontinuing it in October 2014. As a result, throughout 2014, the dollar index shot up more than 12%.
It didn’t stop there, after QE ended, there was a discourse of normalization or an increase in the Fed’s interest rates, which made the US dollar continue to triumph until the end of 2015 when the benchmark interest rate was finally raised 25 basis points to 0.5%.
After that, the Fed maintained that interest rate for 1 year, the strengthening of the dollar index subsided.
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Rupiah is one of the victims of violence taper tantrum at that time. Since Bernanke announced tapering in June 2013 the rupiah exchange rate has continued to decline until it peaked in September 2015.
At the end of May 2013, the rupiah exchange rate was at the level of Rp. 9,790/US$ while on September 29, 2015 it touched the weakest level of Rp. 14,730/US$, meaning that there was a weakening of more than 50%.
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