Highlights

• BI Rate: With 18 Jun-26 BOG meeting’s 25bps hike in its benchmark 7-Day Reverse Repo Rate to 5.75%, cumulative tightening, including the surprise 25bps off-cycle hike on 9 Jun-26, has reached 100bps (highest since Apr-25). The decision was in line with SSI’s expectation and reflects BI’s continued commitment to safeguard macroeconomic stability amid persistent uncertainties, elevated inflation pressures, and FX volatility.

 

• Fed Rate : At its Jun-26 meeting, the Fed left funds rate unchanged at 3.50%–3.75% , marking the 4th consecutive hold and broadly matching market expectations. However, the meeting was hawkish. New economic projections revealed a deeply divided FOMC, with nine officials expecting at least one rate hike this year and six projecting two or more hikes. In contrast, another nine policymakers anticipated either no policy change or rate cuts. The uncertainty was amplified by newly appointed Fed Chair Kevin Warsh not submitting his own rate projection, leaving markets with limited guide on future policy direction under the new leadership.

 

• Indonesia's fiscal development: While Indonesia’s mid-June tax revenue growth to Rp940.3 trillion and a US$17 billion AIIB commitment show steady fiscal progress, these figures also highlight significant structural challenges. Reaching only 39.6% of the annual tax target leaves over 60% of the revenue collection heavily back-loaded for the second half of the year, a task vulnerable to global commodity price fluctuations. Furthermore, the AIIB funds are credit commitments rather than grants, which will expand external debt burdens, while typical bureaucratic hurdles may delay actual project disbursements and their intended economic benefits.

• MSCI Downgrades Market Accessibility Criterion: MSCI lowered Indonesia’s Information Flow accessibility score from “+” to “-”, citing concerns over transparency, free-float visibility, and price discovery. Nevertheless, we believe Indonesia remains likely to retain its Emerging Market classification due to ongoing reforms and adequate market size and liquidity.

 

• Geopolitical Risks Ease as Oil Prices Decline: A temporary peace agreement between the US and Iran and the reopening of the Strait of Hormuz reduced concerns over energy supply disruptions. Brent crude fell below US$80/bbl, easing inflation risks and improving sentiment toward emerging-market assets.