KEY TAKEAWAYS
- Bank Indonesia held the BI Rate at 5.75%, the Deposit Facility at 4.75% and the Lending Facility at 6.50% at the 22-23 September RDG chaired by Governor Destry Damayanti, fully in line with consensus (median 5.75%, 36 estimates). It is the third consecutive hold, and not a passive one · BI simultaneously widened its FX hedging incentives, cutting Swap Beli Lindung Nilai premiums to a tenor-differentiated 15%/20%/25% and DNDF premiums to 25%/30%, an active push to pull in foreign funding rather than move the policy rate.
- The Rupiah remains the swing factor, closing the RDG window at IDR17,855/USD, 0.78% weaker ptp versus end-August after giving back its August-into-mid-September rally as Middle East tensions resurfaced and Brent briefly spiked to USD132/bbl. Compounding the pressure, the Fed Funds Rate has already risen to 3.75-4.00% in September, with BI flagging a meaningful chance of a further US hike.
- Inflation stayed inside the target band even as the composition shifted · August CPI printed 3.19% year on year (from July’s 2.88%), driven by volatile food jumping to 4.06% (chicken, chilies, rice), even as core held steady at 2.92% and administered prices eased to 3.32% on lower avtur and Pertamax prices. With inflation still tracking inside 2.5±1% for 2026-2027, BI has room to hold rather than defend the rate with a hike.
- Bank credit grew 13.65% YoY in August, accelerating from July on BI’s KLM liquidity incentive · banks have drawn IDR461.2 trillion in total incentives, squeezing banks out of SRBI and rotating that money into INDOGB. Key watch: whether the Rupiah can re-establish its August-September rally once this bout of Middle East-driven risk aversion fades, or whether a fourth straight hold turns into an actual hike.
Regards, Aldiracita Research
