Signs from the US Fed

KOMPAS/ALIF ICHWAN

Bank Indonesia (BI) Governor Perry Warjiyo (third left) answers questions from reporters during a press conference on Thursday (18/7/2019) at the bank’s Jakarta headquarters. Perry was accompanied by (from left) BI deputy Dody Budi Waluyo, BI deputy Erwin Rijanto, BI senior deputy Mirza Adityaswara and BI senior deputy Sugeng in announcing the results of the latest BI Board of Governors Meeting, which decided to reduce the benchmark interest rate by 25 basis points (bps) to 5.75 percent, the deposit interest rate by 25 bps to 5.00 percent and the lending interest rate by 25 bps to 6.50 percent.

One of the differences between Donald Trump\'s presidency and that of previous presidents is his use of mass media to express his disappointment with the US Federal Reserve (Fed) governor’s policy on the central bank’s benchmark interest rate. Trump has even threatened to dismiss him.

This was first disclosed in December 2018, when the Fed raised its interest rates as the US economy began to show signs of a possible recession in the next year or two. These signs emerged on 4 Dec. 2018 with the first occurrence of an inverted yield curve (short-term yields on US Government bonds are higher than long-term yields).