The Fed raises interest rates, the S&P 500 closes in the red again

The United States stock market, the S&P 500, experienced another decline for two weeks in a row of -4.65% last week. All sectors in the S&P 500 closed in the red, with the biggest decline in the energy sector at -9% last week. This decline was caused by the Fed announcing that it would increase interest rates by 0.75% to 3.25%. The increase in interest rates is expected by policy makers to reduce the level of inflation in the United States. Investors expect that US interest rates will still be increased to the level of 4% at the end of this year.

In order to control the rate of inflation, BI raised the BI interest rate to 4.25%

Last week, Bank Indonesia announced an increase in the BI7DRR by 0.50% at its Sept. 22 meeting – shifting the interest rate to 4.25% (previously: 3.75%). This was taken as a step to maintain the rate of inflation. Despite tightening, credit still grew by +10.62% y-y (previously: +10.71%), supported by all types of credit and most economic sectors. In terms of prices, BI estimates that inflation will be slightly above 6% until the end of 2022. We estimate an interest rate increase of 0.25% again this year, but do not rule out the possibility that there will be a further increase referring to the Fed's projected interest rate increase.

The European Union publishes new guidelines on Russian coal

A group of European Union countries rejected new guidelines from the European Union (EU) executive that they fear will weaken sanctions and could allow the country to transport key Russian commodities such as coal globally. New guidance from the European Commission, the bloc's executive body, says that transfers of certain goods, including coal and related products, “should be permitted to combat food and energy.” Relaxation of Russian coal sanctions could cause coal prices to fall.

Key Takeaways:

The American stock market experienced another decline of -4.65%. This was caused by the Fed again raising interest rates by 0.75% to 3.25%. This is expected to reduce the inflation rate in the US which is still at 8.26%.

In the international world, several European Union countries rejected new guidelines from the European Union executive which could weaken sanctions on Russia and open up opportunities for the country to transport commodities from Russia such as coal. This was rejected considering that if coal sanctions were relaxed, world coal prices would fall.

The same step was also followed by Bank Indonesia which increased the BI7DRR benchmark interest rate by 0.50% to 4.25%. Even so, the credit growth rate in Indonesia still grew +10.62%, a slight decrease from +10.71% in the previous period. In the future, we expect there will be an increase in the benchmark interest rate of 0.25% until the end of the year.

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