Hasan Zein Mahmud, former Managing Director of the Jakarta Stock Exchange, responded to the caricature of Federal Reserve (The Fed) Chairman Jerome Powell which he considered stinging. Photo of Powell sweating in a dilemma. Raising interest rates will trigger a recession. Not raising will be buttressed by inflation.
A website also 'greets' Hasan with a picture of a bear roaring in front of Wall Street. indicator bearish is complete. The S&P index fell 3.88%. Tech stocks on the Nasdaq fell 4.68%. The DJIA is back close to the 30,000 mark. A wave of volatility is rising. volatility . index , Vix, was up 22.59%
“I've written dozens of times about this 'ghost of inflation'. Back in college, I learned about cost push and demand pull . But there are no lessons about inflation caused by supply chain disruptions," Hasan wrote in his review, quoted on Tuesday (14/6/2022).
Meanwhile, the Federal Open Market Committee (FOMC) will convene again. In the midst of cloudy inflation, breeding concerns that the US Monetary Authority will be more hawkish . An increase in the interest rate by more than 50 basis points, which the market had anticipated. Streamline the US$9 trillion balance sheet faster, draining global liquidity.
“The question is, can inflation that is rife due to supply chain disruptions be tamed only with a tight money policy? At least we know who is the 'trigger' behind all this trouble in the supply chain,” he said.
If the Fed Funds Rate (FFR) increases 75 basis points, the yield 10Y Treasury could approach or even surpass the 4% mark. Rupiah will weaken sharply. Hopefully it doesn't exceed the psychological 15,000 mark. The government must also increase the SBN coupons to maintain differential interest rate a 4.5-5%
“No matter how hard the government tries to reduce inflation by inflating subsidies, it will not be able to completely overcome the spike in energy prices. And, imported inflation . My estimate is that by the end of this year, Indonesia's inflation will rise above 4%," he said.
Bank Indonesia (BI), besides having to be more diligent in market intervention so that the rupiah does not collapse, must also implement a tight money policy. It is not enough to increase the reserve requirement as he did last month, but to raise the benchmark interest rate ( BI-7 Day Reverse Repo Rate / BI7DRR). Not just once, but many times.
“Welcome recession. Welcome bear ( bearish ). In the stock market, we have to invent a move to beat the bear!” said Hasan.
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