Interest Rate Uncertainty Pressures US Stock Market

The United States stock market, the S&P 500, closed slightly lower by -0.69% throughout last week's trading. This performance still reflects the release of inflation data for October which was lower than expectations, but was also pressured by negative news from the Fed's comments on interest rates. Last week the Fed said that further interest rate increases were still needed to achieve the ideal level of economic contraction. Meanwhile, how high the interest rate needed is still being discussed. This creates uncertainty for investors, which puts pressure on the stock market. Only 3 of the 11 S&P 500 sectors closed green throughout last week, namely sectors that were considered defensive, including Consumer Staples at +1.6%, Healthcare at +0.9%, and Utilities at +0.8%.

The Trade Balance was again reported as a surplus

Indonesia's Trade Balance for last October reported a surplus of USD 5.76 billion, which was higher than market expectations. This surplus is the 30th time in a row. This achievement was supported by strong export growth of +12.3% year-on-year, from coal exports. In terms of imports, it grew by +17.4% year-on-year, supported by growth in Consumer Goods imports, which indicates a good recovery in domestic consumption.

BI Announces Interest Rate Increase to 5.25%

Bank Indonesia announced that it would again raise its benchmark interest rate by 0.5% to 5.25% at its meeting last week. According to Bank Indonesia's view, currently inflation in Indonesia has not yet reached its peak. Inflation at the end of 2022 is estimated to be at the level of 5.6%. This figure is lower than the previous prediction, namely 5.9%. For plans for future interest rates, Bank Indonesia has not yet provided guidance, but according to BI's view, the Fed will still increase interest rates until the first quarter of 2023. This could be an indication that interest rates in Indonesia will also experience a similar thing.

Key Takeaways:

The United States S&P 500 stock market index closed lower by -0.69% throughout last week's trading due to the Fed's response indicating that it would still raise interest rates to reach the ideal level of economic contraction. This provides uncertainty for investors, thereby putting pressure on stock index prices in the US.

For the domestic economy, the trade balance was reported to be in surplus for the 30th time in a row. This achievement was supported by export growth of +12.3% year-on-year, as well as import growth of +17.4% year-on-year. In addition, Bank Indonesia announced an increase in interest rates by 0.5% to 5.25%. Inflation in Indonesia has not yet reached its peak, and the inflation level at the end of 2022 is estimated to be at 5.6%. Bank Indonesia has not yet announced further plans regarding interest rates, but there are indications that it will follow in the footsteps of the Fed, which will continue to increase interest rates until the first quarter of 2023.

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