The central bank, Bank Indonesia (BI), said the global financial market uncertainty remains high despite a stronger world economic outlook. Global economic growth in 2024 is projected to exceed the initial projection, reaching 3.2%, primarily driven by stronger growth in India and China. The US economy is gaining momentum on the back of improving domestic demand and higher exports, accompanied by a prolonged disinflation process. Such conditions are expected to prompt a lower Federal Funds Rate (FFR) towards the end of 2024.
Meanwhile, the European Central Bank (ECB) has lowered its monetary policy rate sooner in response to milder inflationary pressures. Monetary policy divergence among advanced economies, coupled with deepening geopolitical tensions, has perpetuated high global financial market uncertainty.
Such developments, together with higher US Treasury yields, have led to a strong US dollar, thereby exacerbating broad-based currency pressures on global currencies and restrained foreign capital inflows to emerging market economies (EMEs). Elevated global financial market uncertainty demands a strong policy response to mitigate the adverse impact of global uncertainty spillovers on emerging market economies, including Indonesia.