Global Financial Market Expactity Eases, BI Reveals Foreign Capital Flows Are Starting To Enter

JAKARTA - Bank Indonesia (BI) expressed that the uncertainty of the global financial market is starting to subside with the risk that it still has to be watched out for in the future.

BI Governor Perry Warjiyo said the global economy in 2024 is predicted to grow by 3.2 percent with a slow trend.

"The economy of the United States (US) is expected to slow down in the second semester of 2024 in line with the decline in domestic demand. Meanwhile, China's economy is not yet strong and in the European area continues to record improvements," he explained at a press conference, Wednesday, August 21.

Perry explained that the slowdown in the US had an impact on increasing unemployment and a faster decline in inflation towards the long-term inflation target of 2 percent.

"This development encourages the strong exploitation of the US policy interest rate reduction or the Fed Funds Rate (FFR) to be faster and bigger than previously expected," he explained.

According to Perry, this estimate led to a decline in the 2-year US Treasury tenor yield and was followed by a 10-year tenor and a weakening of the US dollar against various currencies in the world.

In addition, Perry said that the uncertainty in the global financial market, which has begun to subside in various developments, has prompted increased foreign capital inflows and strengthened the currency of developing countries, especially Indonesia.

"In the future, it is related to risks with concerns about the US economic recession and geopolitical dynamics in various parts of the world, including the US, by running the general election process there, this condition must be observed. This requires caution in formulating a policy response from the propagation of global uncertainty towards the domestic economy," he said.