- BI held the BI Rate at 5.75% for the second consecutive meeting, supported by a strengthening Rupiah and declining SBN yields. The favorable backdrop stems largely from post-Fed Dollar weakness and calm domestic conditions, with no major policy surprises in recent weeks.
- BI expanded its hedging swap discount to cover banks' offshore borrowing and FDI, beyond just portfolio inflows, which can attract more foreign exchange, bolster the financial account, and wind down SRBI issuance that has been draining domestic liquidity.
- Domestic liquidity remains strained, with loan growth accelerating to 13.6% YoY and IndONIA briefly breaching 6.3%. While KLM incentives may provide September relief, persistently rising global long-term yields lead us to project another hike to 6.00% this year.
