Data for January showed the resilience of inflation. After the announcement of headline inflation data which grew 3.1% on an annual basis, producer price index data for January was also reported to have experienced its highest growth in the last 5 months with an annual increase of 0.9%, exceeding consensus expectations. Meanwhile, the Core PCE Price Index—the Fed's preferred parameter—also showed an increase of 2.4% on an annual basis.

Interest rate cuts to come later than expected. Previously, at the beginning of the year, the majority of investors expected the Fed to drop its benchmark interest rate at its March 2024 meeting. However, inflation data for January supported the Fed's conclusion that further information is needed to determine whether the inflation rate is approaching their 2% target. Aside from that, non-farm payroll data increased by 353,000 in January, above consensus estimates, indicating that labor data remains strong. Investors believe the Fed will be able to begin decreasing interest rates in the second half of this year, with the maximum probability of a meeting in September 2024.

The Chinese government's backing bolsters stock market fluctuations. Since the beginning of the year, the Chinese government has released a large amount of stimulus to help the country's economy recover. Starting with a reduction in the RRR, the 5-year Loan Prime Rate, and plans to raise up to CNY 2 trillion to maintain stock market stability. This is evidenced by news in early February from Central Huijin, a unit of the large sovereign wealth fund China Investment Corporation, which stated that it had expanded its purchases of ETFs (Exchange Traded Funds) related to domestic shares, resulting in a rapid increase in the flow of funds into the Chinese stock market.

JCI rose 1.50% in February, aided by significant foreign fund flows. Infrastructure, consumer non-cyclicals, and industrials made up the supporting sectors. Foreign fund inflows totaled up to IDR 10.11 trillion in February, bolstering the JCI as a whole

United States’ Inflation Rate

Source: Bloomberg, March 13, 2024

Sectoral Performance in Indonesian Stock Market

Source: Bloomberg, February 29, 2024