US Economic Data in Line with the Fed's Expectations?

The United States stock market, the S&P 500, closed up +0.79% during last week's trading. Market movements are influenced by several factors. The inflation report in March and the producer price index report declined with the CPI figure down one percent from February and the PPI figure falling more than expected. This suggests that aggressive interest rate increases by the Fed are having the desired effect of cooling the economy. Additionally, statistics on Thursday showed that the number of Americans filing unemployment claims in the past week increased, raising hopes for some easing in the labor market. Despite some of this positive economic data, Fed president Mary Daly said that further policy tightening may still be necessary. In contrast, at the central bank's monetary policy committee meeting published last Wednesday, some officials considered halting interest rate hikes in light of the recent banking crisis. 7 of the 11 sectors closed green with the biggest increases in the Financial and Energy sectors, respectively +2.86% and +2.47%.

Foreign Exchange Reserves Soar to USD 4.9 Billion

Indonesia's foreign exchange reserves showed a significant increase, with a value of USD 145.2 billion at the end of March 2023. This monthly growth of USD 4.9 billion was the highest increase in the last 16 months. The surge was mainly driven by tax revenues, which grew rapidly in early 2023 (grew +40.4% YoY in February). This trend is expected to continue in March, in line with the final month of 2022 tax reporting. The strong growth in tax revenues, especially in foreign exchange, can be attributed to strong export earnings in 2022 due to the commodity boom. This positive condition can provide BI with significant cushion and flexibility to maintain current policy (5.75% policy interest rate plus accommodative macroprudential policy) to face the prospect of slowing growth in the future.

Restrictions on Truck Operations During Eid

The government has announced the suspension of truck operations for 12 days during the homecoming period ahead of Eid al-Fitr this year, which is the longest restriction compared to the 10-day restriction in 2016. This policy will apply from April 17-21 for homecoming trips, and April 24-26 and April 29-May 2 for the return trip (two phases). This is expected to impact manufacturing activity, with manufacturers expressing concerns about additional costs due to backlogs of goods at ports.

Key Takeaways:

The United States stock market, the S&P 500, increased by +0.79% throughout last week's trading, supported by various economic data that supports estimates that the time is near for the Fed to immediately consider temporarily stopping the increase in interest rates. Inflation figures indicate a decline, and unemployment figures have increased. Nonetheless, the Fed stated that further policy tightening may still be necessary.

For the domestic economy, the country's foreign exchange reserves showed a jump of USD 4.9 billion at the end of March, which was the highest increase in the last 16 months. The surge was mainly driven by tax revenues. This positive condition can provide BI with sufficient cushion and flexibility to face the prospect of slowing growth in the future.

In other news, the Government has announced the suspension of truck operations for 12 days during the homecoming period ahead of Eid al-Fitr this year. This is expected to impact manufacturing activity, with manufacturers expressing concerns about additional costs due to backlogs of goods at ports.

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