The Fed Raises Interest Rates 0.25%

The United States stock market, the S&P 500, closed up +1.01% throughout last week's trading. Last Wednesday, the Fed raised its benchmark interest rate by 0.25% according to market expectations. Interest rates currently stand at 5.5%, the highest level in 22 years. Market participants believe that this is the last interest rate increase by the Fed, as the latest inflation data has shown signs of decline. Jerome Powell said after the decision that the Federal Reserve staff no longer expected a recession, as well as emphasizing that there would be no interest rate cuts this year. Last week also coincided with the European Central Bank (ECB) interest rate decision which raised interest rates by 0.25% according to market expectations.

The APBN surplus was recorded at 152.3 trillion, 0.71% of GDP

In June, the state budget recorded a surplus of IDR 152.3 trillion, equivalent to 0.71% of GDP. Government revenue increased by 5.4% YoY to IDR 1,408.9 trillion last June. Both tax and non-tax revenues grew by 5.4% and 5.5% YoY respectively. The transportation and services sectors recorded increases of 43.5% and 28.6% YoY respectively, driven by increased mobility and increased tourism during the long weekend and school holiday season. In addition, tax revenues are expected to grow as economic activity recovers. Government spending recorded growth of 0.9% YoY to IDR 1.256 trillion. This increase was mainly driven by ministry expenditure which grew by 5.9% YoY, which was allocated for election purposes, construction of a new capital city, and completion of infrastructure projects.

BI Announces Additional GWM Incentives

Bank Indonesia announced an additional Mandatory Minimum Reserve (GWM) incentive of 1.2% which will take effect from 1 October 2023. This GWM incentive will increase the maximum limit of GWM incentives that banks can obtain from 2.8% to 4%. This incentive is aimed at providing loans to priority sectors (downstream oil and gas and non-oil and gas, housing and tourism), credit components to the ultra-micro, micro and MSME segments, as well as for 'green' loans.

Key Takeaways

The United States stock market, the S&P 500, closed up +1.01% throughout last week's trading. Last Wednesday, the Fed raised its benchmark interest rate by 0.25% according to market expectations. Interest rates currently stand at 5.5%, the highest level in 22 years. Market participants believe that this is the last interest rate increase by the Fed, as the latest inflation data has shown signs of decline.

For the domestic economy, the state budget in June recorded a surplus of IDR 152.3 trillion, equivalent to 0.71% of GDP. Government revenue increased by 5.4% YoY to IDR 1,408.9 trillion last June. Both tax and non-tax revenues grew by 5.4% and 5.5% YoY respectively. Government expenditure recorded growth of 0.9% YoY to IDR 1,256 trillion, mainly driven by ministerial expenditure allocated for election purposes, construction of a new capital city, and completion of infrastructure projects.

In other economic news, Bank Indonesia announced an additional Statutory Reserve (GWM) incentive of 1.2% which will take effect from 1 October 2023. This GWM incentive will increase the maximum limit of GWM incentives that banks can obtain from 2.8% to 4%.

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