Beware of US Inflation Spike

The weakening of the rupiah against the US dollar, will be followed by an increase in domestic prices because 60 percent of industrial raw materials still rely on imports.

KOMPAS/TOTOK WIJAYANTO (TOK)

An employee of a foreign currency exchange company, Valuta Artha Mas, at ITC Kuningan, Jakarta, counts and checks the condition of US dollar bills, Wednesday (29/6/2022). The Fed has raised its interest rate by 150 basis points (bps) to the level of 1.5-1.75 percent.

JAKARTA, KOMPAS — The surge in inflation in the United States needs to be monitored because it adds to the uncertainty of the global economy. If not mitigated properly, these conditions can disrupt the country’s economic recovery.

The United States statistical agency noted that US inflation in June reached 9.1 percent on an annual basis – the highest annual inflation level since 1981. This has the potential to encourage the US central bank, the Federal Reserve, to be more aggressive in raising its benchmark interest rate. So far this year alone, the Fed has raised its interest rate by 150 basis points (bps) to the level of 1.5-1.75 percent.