Indonesia & Asian Stock Indices Jump on Federal Reserve Tapering Decision
The central bank of the United States, the Federal Reserve (FED), announced that it will start winding down its quantitative easing program in January 2014. Currently, the Fed purchases USD $85 billion worth of bonds per month but this amount will be reduced to USD $75 billion next month. The Fed came to this decision as prospects of the US labor market have shown a marked improvement, while economic growth is expected to accelerate to between 2.8 and 3.2 percent in 2014 and between 3.0 to 3.4 percent in 2015.
The Federal Reserve expects the US unemployment rate to range between 6.3 and 6.6 percent in 2014. In 2016, it will ease to below the 6 percent mark. US inflation in 2014 will be around 1.4 to 1.6 percent, which is lower than the the Fed's previous forecast (1.3 to 1.8 percent).
Investors reacted positively to the Fed's announcement as they are happy that the period of prolonged market uncertainty about the start of the "tapering" has now gone. The Dow Jones Index immediately jumped 1.84 percent on Wednesday (18/12), while Asian indices opened positive on Thursday (19/12). The MSCI Asia Pacific Index rose 0.3 percent, the Nikkei 1.8 percent, the Topix 1.4 percent, the Australia S&P/ASX 200 0.9 percent and the Kospi also 0.9 percent.
Indonesia's IHSG was up 0.94 percent to 4,235.85 points at 10.15 local Jakarta time, while the IDR rupiah exchange rate appreciated 0.93 percent to IDR 12,055 per US dollar according to the Bloomberg Dollar Index.
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