US Inflation Reported 3.2% in July

The United States stock market, the S&P 500, closed down by -0.31% throughout last week's trading. The inflation report showed that the consumer price index (CPI) rose slightly to 3.2%, compared to 3% in June. However, the overall picture shows a slowdown in inflation. According to RSM US LLP economist, Joe Brusuelas, this inflation figure supports expectations of a temporary suspension of interest rates by the Fed for September and is good economic news considering the level of inflation last year. According to the CME FedWatch Tool, market participants predict with 88% confidence that the Fed will hold interest rates at its next meeting in September. Apart from that, another reason for the market decline this week was the decline in the technology sector amid valuations that were considered high.

Indonesia's GDP Increased to 5.17% in 2Q23

The GDP report for the second quarter of 2023 shows stronger growth momentum compared to the previous quarter. The GDP growth rate increased to 5.17% on an annual basis (YoY), surpassing expectations and the previous quarter's 5% and 5.04%, respectively. Personal consumption experienced a significant increase at 5.23% YoY, higher than the previous quarter at 4.54%. Eid celebrations contributed to this increase. The rise in personal consumption was driven by increased spending on clothing, education, health care, and recreational activities. Government consumption also experienced significant growth, reaching 10.6% YoY, compared to the previous quarter at 3.45%, driven by fiscal spending. Investment growth experienced growth of 4.6% YoY, driven by infrastructure development such as roads and irrigation. In line with Bank Indonesia's policy which emphasizes the growth and stability of the Rupiah exchange rate, market players still see BI maintaining interest rates at 5.75% until the end of this year.

July Foreign Exchange Reserves Rise to $137.7 billion

Foreign Exchange Reserves for July increased for the first time in four months, reaching $137.7 billion compared to $137.5 billion in June. This amount is equivalent to six months of imports and foreign currency debt payments. However, this increase was largely due to the aggressive use of foreign exchange swaps (FX swaps). Utilization of FX swaps in July reached $3.22 billion, marking the highest level of usage since 2020. It is important to note that inflow through FX swaps indicates potential outflow from FX swaps in the future.

Key Takeaways

The United States stock market, the S&P 500, closed down by -0.31% throughout last week's trading. The inflation report showed that the consumer price index (CPI) rose slightly to 3.2%, compared to 3% in June. However, the overall picture shows a slowdown in inflation. According to RSM US LLP economist, Joe Brusuelas, this inflation figure supports expectations of a temporary suspension of the Fed's interest rates.

The GDP report for the second quarter of 2023 shows stronger growth momentum compared to the previous quarter. The GDP growth rate increased to 5.17% on an annual basis (YoY), surpassing expectations and the previous quarter's 5% and 5.04%, respectively. Market players still see BI maintaining interest rates at 5.75% until the end of this year.

Foreign Exchange Reserves for July increased for the first time in four months, reaching $137.7 billion compared to $137.5 billion in June. This amount is equivalent to six months of imports and foreign currency debt payments.

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