Global Uncertainty Begins To Subside, KSSK Remains Alert To Middle East Geopolitical Conflicts
JAKARTA - The Financial System Stability Committee (KSSK) expressed that the uncertainty of the global financial market to subside in the third quarter of 2024 was supported by the easing of monetary policy from various countries. This is in line with inflationary pressures in various countries that slow down or decrease.
This is based on the results of the KSSK Coordination Meeting conducted by the Ministry of Finance (Kemenkeu), Bank Indonesia (BI), the Financial Services Authority (OJK), and the Deposit Insurance Corporation (LPS).
Finance Minister Sri Mulyani Indrawati explained that inflation in the United States (US) is expected to approach the target of 2 percent year on year (YoY) amid the slowdown in economic growth and the tendency for the high unemployment rate in the US.
"This development encourages the Fed to cut the Fed Fund Rate by 50 basis points to a level of 4.75 percent to 5 percent in September 2024. And with a signal that there will be further easing until the end of 2024," he said at the KSSK Periodic Meeting Results Press Conference in 2024, Friday, October 18.
Sri Mulyani added that in line with these developments, US bond yields or US Treasury yields for the 2-year tenor decreased significantly, and now US Treasury tenor yields are 2 years lower than the 10-year US Treasury tenor yield.
"This is a good development because previously the short-term yield was higher than in the long term," he said.
Sri Mulyani said that because the higher for longer has begun to subside, increasing the flow of foreign capital with lower interest rates in the main country, the capital flow returns to emerging markets or to developing countries, including entering Indonesia.
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However, Sri Mulyani said that the KSSK would remain vigilant and anticipate an increase in the dynamics of global economic uncertainty and financial markets in the fourth quarter of 2024. In line with the escalation of geopolitical turmoil in the Middle East region.
"We are increasing vigilance amid various risks, especially those from external ones that are dynamic and have the potential for its propagation of the economy and stability in the domestic financial sector," he said.
Sri Mulyani explained the geopolitical tension between Israel and Palestine that developed with Hesbullah to attack Lebanon, and even entered into geopolitical tensions because of direct confrontation with Iran.
According to Sri Mulyani, the escalation is high enough to affect the dynamics of global finance and all members of the KSSK will continue to strive to mitigate the impact of the uncertainty of global conditions on Indonesia's economy and finances.