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Cooling US inflation could bring more capital to RI, analysts say
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Greenbacks: An employee counts United States dollar banknotes at the Ayu Masagung money changer in Kwitang, Central Jakarta, on March 19, 2020.
(JP/Wendra Ajistyatama)
T
he United States inflation rate has fallen to its lowest level in more than two years, meaning emerging market economies like Indonesia’s may see greater inflows amid more favorable exchange rates.
Annual inflation in the US fell to 3 percent in June, the lowest level since March 2021, although still higher than the Federal Reserve’s 2 percent target.
The value of the US dollar was at a 15-month low against other currencies on the back of declining inflation figures, which could mean the Fed is nearing the end of its rate-hiking cycle, according to Reuters.
"For markets, the weaker dollar and its underlying driver, weaker inflation, is a balm for everything, especially for assets outside the US," said Alvise Marino, foreign exchange strategist at Credit Suisse, on Friday, as quoted by Reuters.
Read also: Dollar pinned near 15-month low as easing inflation spurs rate peak bets
Josua Pardede, chief economist at publicly listed lender Bank Permata told The Jakarta Post on Friday that the recent data would help improve sentiment in global financial markets, as it increased the chances that the Fed would start cutting rates next year.
This would allow investors to look for assets with higher risk, particularly stocks or assets from emerging economies.
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