- The Fed unanimously kept rates at 3.50%-3.75%, though projections were evenly split between members expecting a hike and those expecting none. Markets reacted negatively, with stocks falling and the probability of a hike this year rising to 85%.
- The FOMC cut its statement to one-third its previous length, eliminating forward guidance and committing to less frequent communication. This risks greater market volatility around data releases and may complicate policy alignment for other central banks.
- BI raised its benchmark rate by 25 bps to 5.75%, totaling 100 bps in hikes over two months, though the rupiah still depreciated 0.82% post-announcement. BI also tightened FX transaction thresholds to further defend the currency.
- BI is expected to stay higher-for-longer, with another 25-50 bps hike still possible this year. Exchange rate pressures and potential El-Niño-driven food inflation in H2-2026 remain key risks despite easing energy prices.
