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Sharp minds, steady hands needed to cope with mixed market signals
World markets are sending some confusing signals, and we can only hope that the sharp minds in both emerging economies and the ongoing IMF-World Bank meetings will find a way to decode them to produce smart decisions for navigating the global economy toward progress.
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Two trains of the Jakarta-Bandung high-speed rail (HSR), branded Whoosh, are parked at the Halim HSR Station in East Jakarta during the service’s inauguration on Oct. 2, 2023. (AFP/Bay Ismoyo)
F
iscal and monetary authorities in emerging market economies, especially Indonesia, should have sharp and firm minds and rely on steady hands to carefully read the meaning of the confusing signals the international markets have been sending lately.
The authorities should act smartly in addressing the confusing signals, yet be prepared to be blamed if any mistake should happen.
What we have mostly observed in the global market, notably in advanced economies, are the strengthening of the United States dollar and the increasing prices of gold and energy. These developments have not been easily understood, but some market signals could give us some clues as to why such trends have occurred.
The US economy has continued to strengthen with a surge of new employment that has not pushed up wages, partly due to new jobs that can be done from home with lower pay. Interest rates have been skyrocketing for such a long time that they have sharply increased the cost of borrowing, which is detrimental to many emerging economies. The big puzzle has been the US bond market, which has complicated corporate investment and financing with its prolonged high interest rates.
People are still worried about the possibility of a recession. As chief economics commentator Martin Wolf argued in his latest op-ed in the Financial Times, “The world economy is resilient, yet weakening.”
Amid the seeming market turbulence, the calmness and confidence with which US Secretary of Treasury Janet Yellen stated that the US bond market remained strong was definitely comforting. It was also good that the US could avoid a government shutdown, at least for 45 days.
In other parts of the world, the worsening condition of China’s property markets is surely bad for the rest of the world, as is the weakening condition of India’s economy.
