ECB Tightening Cycle May Be Shallower Than Expected Amid Indonesian Fiscal Credibility Focus

The European Central Bank (ECB) has resumed its tightening cycle, but recent data suggests that this cycle may be shallower than 2022's. The Federal Reserve is also considering a hike in interest rates, as markets reprice the policy path and Treasury pressures broaden beyond front-end yields.

One of the key signals to watch for further tightening is 5Y5Y inflation expectations, oil prices, and money growth. These indicators will provide insight into whether the current cycle is indeed shallower than previous ones.

In Indonesia, the appointment of Suahasil Nazara as Finance Minister has been met with market interest. With his experience in fiscal policy, budget management, and government financing, he is expected to maintain policy continuity and credibility. His priorities include maintaining the APBN's credibility, strengthening public communication, and ensuring the budget supports key programs.

Looking ahead, fiscal discipline will remain a key commitment, with the new Finance Minister reaffirming the 3% fiscal deficit ceiling. Improving spending efficiency and budget allocation will be crucial in achieving this goal.