Jakarta, CNBC Indonesia – The central bank of the United States (US) or known as the Federal Reserve (The Fed) is just counting the days for tapering. This has been confirmed by the chairman of the Fed, Jerome Powell. However, unlike 2013, the tapering this time was taken lightly by market players, yet there has been no visible turmoil in global financial markets.
This means that the Fed has successfully communicated with the market. In 2013, when a taper tantrum occurred due to the announcement of the tapering or reduction in the value of the asset purchase program (quantitative easing/QE) The Fed, poor communication is said to be the cause.
At that time, market participants were surprised by the tapering announcement, capital outflows from emerging market countries returned to the United States, and global financial markets experienced turmoil. At that time, the rupiah slumped, the stock market including the Composite Stock Price Index (JCI) also experienced the same thing, although not as bad and as long as the rupiah.
Meanwhile, this year, the Fed has communicated long ago regarding tapering, and it will almost certainly be done this year. It could be the middle of next month, or in December.
“I think it’s time for tapering, I don’t think it’s time to raise interest rates,” Powell said in a virtual conference Friday (23/10), as proclaimed Reuters.
Powell stated that currently there are 5 million workers who are still not absorbed as before the corona virus disease (Covid-19) pandemic hit the world.
“We think we can be patient (to raise interest rates) and let the labor market recover,” he added.
Apart from that, Powell also emphasized that the current high inflation in the United States will slow down in the future.
Powell’s statement indicates that new interest rates will be raised in 2023. Powell’s statement is slightly different from the majority of his colleagues at the Fed.
At the end of each quarter, the Fed will provide its interest rate projections, as seen from the dot plot. Each point in the dot plot represents each member of the Fed’s view of interest rates.
In the latest dot plot, as many as 9 of the 18 members of the Federal Open Market Committee (FOMC) now see interest rates could rise next year. This number is an increase of 7 people compared to the June edition of the dot plot. At that time, the majority of the FOMC saw interest rates rising in 2023.
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