DIGIVESTASI - The Jakarta Composite Index (IHSG) experienced a significant decline during the first trading session on Thursday (December 19, 2024), following the decision by the U.S. Federal Reserve (The Fed) to cut its benchmark interest rate again.

At 09:10 WIB, the IHSG dropped by 1.46 percent to 7,003.93, nearing the important psychological level of 6,900. The transaction value for this session reached approximately IDR 1.8 trillion, with 2.2 billion shares changing hands in 140,712 transactions. A total of 79 stocks strengthened, 350 weakened, and 153 were stagnant.

All sectors saw a decline, with the basic materials and technology sectors posting the largest corrections of 2.18 percent and 2.08 percent, respectively. On the stock side, two large banking companies significantly weighed on the index, with PT Bank Mandiri (Persero) Tbk (BMRI) contributing a drop of 15.6 points and PT Bank Rakyat Indonesia (Persero) Tbk (BBRI) contributing 11.6 points. Other stocks such as PT Barito Renewables Energy Tbk (BREN) and PT Telkom Indonesia (Persero) Tbk (TLKM) also contributed to the decline, with losses of 9.5 points and 6.9 points, respectively.

The decision by The Fed to cut interest rates by 25 basis points to a range of 4.35–4.50 percent early this morning served as the main catalyst for this decline. While in line with market expectations, the Fed’s cautious stance regarding further policy adjustments added to the uncertainty. Based on the November dot plot projection, The Fed now predicts only two rate cuts in 2025, down from an earlier forecast of four cuts.

Fed Chair Jerome Powell stated that the interest rate policy is now more flexible, requiring a cautious approach to the next steps. “We have lowered the rate by one percentage point from its peak, giving us room to carefully consider further adjustments,” Powell said during his press conference.

Domestically, the IHSG was also pressured after Bank Indonesia (BI) decided to keep its benchmark interest rate at 6 percent during its Board of Governors’ meeting on December 17-18, 2024. This decision diverged from the expectations of most analysts who had forecast a 25 basis point reduction.

BI’s decision was based on the aim of maintaining inflation within the target range of 2.5 percent plus or minus 1 percent for 2024-2025 while supporting sustainable economic growth. BI Governor Perry Warjiyo stated that maintaining exchange rate stability is the central bank's top priority amid rising global economic uncertainty and geopolitical tensions.

Nevertheless, BI left open the possibility of future rate cuts, depending on global developments and exchange rate trends. Perry also highlighted the impact of policy changes in the U.S. and global inflation trends that need to be anticipated by domestic monetary policy.

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