Fed's Decision Boosts Gold, Oil Prices

JAKARTA (Sept 19)   The Federal Reserve’s recent decision to keep its economic stimulus program at the current level has not only boosted the Jakarta Composite Index (JCI), but also gold and crude oil prices.

“Gold and oil prices were up by 4.25 percent and 2.68 percent at US$1.365 per troy ounce and US108.24 per barrel, respectively. Foreign funds were also bound to flow back to the market,” David told Tempo on Thursday, September 19, 2013.

David said the Fed’s decision had surprised the market. “The Fed’s decision will positively affect the emerging stock markets, including Indonesia."

He said the markets had anticipated the Fed would taper its US$10-15 billion stimulus, which led to pressured domestic capital and financial markets.

Earlier reports said the Fed had decided to maintain its economic stimulus program at US$85 billion a month. But Fed chairman Ben Bernanke said there was still a possibility the central bank would taper its stimulus by year-end.

The delayed tapering referred to the slower US economic growth. recent releases showed that, as of May 2013, the interest rate for 30-year mortgages had increased by more than one percent.

Per August this year, the US unemployment rate stood at 7.3 percent, a record low since the 2008 monetary crisis. In the same period, inflation rate was already lower than Fed’s two-percent target.