The signal for a US Federal Reserve interest rate hike is strengthening ahead of the Federal Open Market Committee (FOMC) meeting scheduled for September 20-21, 2016. On August 26, 2016, Federal Reserve Chair Janet Yellen, in a speech at the Fed's annual monetary policy conference, signaled an intention to raise the benchmark interest rate, currently at 0.5 percent.
The Fed's interest rate serves as a benchmark and guide for fund managers worldwide in determining investment direction across global stock markets, commodities, and money markets. A Fed rate hike will theoretically strengthen the US dollar (USD), used as a global reserve currency. This could weaken other global currencies, including the Indonesian Rupiah.
Under Janet Yellen's leadership, the Fed has ended the era of near-zero interest rates maintained for seven years by her predecessor, Ben S. Bernanke. At the FOMC meeting on December 16, 2015, Yellen raised the Fed's interest rate by 25 basis points (bps) to 0.5 percent—the first increase since mid-2006.