Normalization of Monetary Policy
On September 20, in a Federal Open Market Committee meeting that is held eight times a year, the US Federal Reserve decided not to change its Fed funds rates or prime rates, which currently sit at around 1 to 1.25 percent.
The Fed also decided to jumpstart a program to reduce its securities portfolio in its October balance sheet. Since the global financial crisis of 2008, the Fed’s balance sheet has skyrocketed to US$4.5 trillion, four times the amount before the crisis occurred. What does the action mean and what are its implications for developing economies, such as Indonesia?