The Fed raises interest rates to 4.75%, S&P 500 rises 1.6%

The United States stock market, the S&P 500, closed up 1.6% throughout last week's trading. Market sentiment generally experienced positive developments after the Fed's meeting on Wednesday, where Jerome Powell said there were signs of improving inflation. The Fed increased interest rates by 25 bps (0.25%) to 4.75%, in line with market expectations. However, the employment report again provided unfavorable sentiment for the market. In the January 2023 employment report, the number of new jobs was at 517 thousand jobs, well above the consensus of 185 thousand, and almost double from 260 thousand in December. As a result, the unemployment rate fell to 3.4%, the lowest position since 1969. Market players are concerned that a reversal in interest rates will not occur in the near future if the employment situation continues to strengthen. The communication services sector experienced an increase of +5.3%, and the technology sector experienced an increase of +3.7%. Meanwhile, the Energy sector experienced a significant decline of -5.9% due to the decline in world oil prices.

Indonesian inflation in January 5.3%

The inflation report in January showed a level of 5.3% YoY or 0.3% MoM, lower than the consensus of 5.4% YoY. The increase in inflation was influenced by the increase in food prices, especially rice which increased by +2.34% compared to the previous month, and the price of red chilies which increased by +10.9% compared to the previous month. To cope with rising rice prices, the government has finalized plans to import 500,000 tons of rice by the end of February. In addition, transportation prices decreased by -1.15% MoM, influenced by lower airline ticket prices and lower fuel prices.

The Rupiah strengthened again to around 14,800

The Rupiah exchange rate has strengthened again, successfully breaking through the 15,000 mark and is currently at around 14,800, the strongest since September 2022. Compared with neighboring countries, the Rupiah is in 2nd position as the strongest currency since early 2023, behind the Thai Baht. In other economic news, foreign investor flows have returned to government bonds, with an inflow of USD 3.2 billion, increasing the percentage of foreign ownership by 70 bps to 15.1% last January.

Key Takeaways:

The United States stock market index S&P 500 closed up 1.6% in trading last week. This was driven by positive sentiment from market players towards the Fed's interest rate increase which was in line with consensus by 25 bps to 4.75%. However, there is still negative sentiment regarding the strengthening employment situation in the US, which has the potential to delay the Fed's decision to reverse interest rate direction.

For the domestic economy, Indonesia's inflation report for January 2023 was at 5.3% YoY, or 0.3% MoM, lower than the consensus of 5.4% YoY. This increase was influenced by the increase in food prices, especially rice, which increased by +2.34% compared to the previous month.

In terms of the Rupiah exchange rate, it has strengthened again, successfully breaking through the 15,000 mark and is currently in the range of 14,800, the strongest since September 2022. Compared with neighboring countries, the Rupiah is in 2nd position as the strongest currency since early 2023 .

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