Hawkish aggressive FFR 100 Bps required, US inflation breaches 9%. FFR Futures support a 100 bps rate hike at the end of July, to reduce Headline Inflation or June CPI which reached 1.3% MoM (Vs. May 1.0% MoM) and 9.1% YoY (Vs. May 8.6% YoY ). Inflation in June was driven by spikes in fuel and natural gas prices, which rose 11.2% MoM and 8.2% MoM, respectively. The increase also occurred in core inflation, with CPI Ex. Food and Energy which reached 0.7% MoM (Vs. May 0.6% MoM) and 5.9% YoY (Vs. May 6.0% YoY). This raises the question of how severe the impact of the Fed’s aggressive Hawkish on a potential US economic recession will be, and has again boosted the safe-haven interest in UST10Y and USD. Yesterday, the Dow Jones led the pressure on Wall Street stocks, closing down 0.7%.
Survey: BI 7DRRR maintained at 3.50%, in stark contrast to the FFR which is speculated to rise by 100 bps based on FFR Futures projections. NHKSI Research saw that the survey used the assumption that core CPI inflation in June is still low at 2.63% YoY or below the median value of BI’s annual target of 2%-4%. Meanwhile, assuming a 100 bps increase in FFR makes the Fed’s interest rate at the level of 2.50%-2.75% at the end of July, only 75 bps – 100 bps gap to BI’s 7DRRR position. Furthermore, the depreciation of rupiah has a positive impact on the shares of export-based issuers, and recorded USD-denominated income. However, it has a negative impact on the stock of import-based issuers. Yesterday, the JCI weakened 1.2% to 6,640 points.
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