- The Fed held rates at 3.50%-3.75% amid Middle East uncertainty, with 4 dissenting votes. The statement turned more hawkish, acknowledging elevated inflation and geopolitical risks, pushing the 10-year treasury yield up ~7 bps.
- Incoming Fed chair, Kevin Warsh, favors a "regime change" - reducing the balance sheet through QT while potentially cutting rates, though the effectiveness of this trade-off remains uncertain amid cost-push inflation risks.
- A near-term rate cut remains unlikely, as elevated inflation and Middle East tensions persist. Bank Indonesia is expected to hold rates unchanged, with outflow pressures on Indonesia likely to continue in the coming months.
