- BI’s 50 bps hike signals stronger IDR stabilization focus, tighter FX controls, elevated short end yields, and targeted growth support.
- Current episode appears defensive and FX-driven, contained inflation limits hike risks as govt keeps fuel prices unchanged.
- We highlight the key factors behind BI’s rate hike decision and revise our scenario band, with 10Y yields at 6.7% to 7.3%.
HIGHLIGHTS
- Stability Moves To The Fore
- What’s Next?
- Key Factors Behind the Rate Decision: Our View
- Scenario Band Revision
- Capital Market: Rising Yield Continues
- Upcoming SUN Auction
- Previous SUN Auction Results
This Week Key Focus
- United States PCE Price Index – April 2026 (Thursday)
- Japan Retail Sales – April 2026 (Friday)
Last week Key Events
GLOBAL UPDATES
- The People’s Bank of China (PBOC) kept its key lending rates unchanged in May 2026
- Japan’s inflation continued to ease in April 2026, with headline CPI slowing to 1.4% YoY from 1.5% previously
- Japan’s trade balance swung to a surplus of USD1.93 billion (JPY301.9 billion) in April 2026
DOMESTIC UPDATES
- Bank Indonesia (BI) raised its benchmark policy rate by 50bps to 5.25% at the May 2026 Board of Governors Meeting
- Indonesia’s annual loan growth accelerated to 9.98% YoY in April 2026
- Indonesia’s current account deficit widened sharply to USD4.0 billion
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