• Bank Indonesia (BI) maintained the BI Rate at 5.75% during the August 2026 meeting, marking the second consecutive hold. Very favorable conditions, including a strengthening Rupiah and declining SBN yields, prompted BI to forgo any upward rate adjustment.
• The favorable conditions are largely attributable to the global environment. Following the end-July Fed meeting, the Dollar Index has failed to recover to its pre-meeting level. Domestic conditions have also played a part: the absence of major news or sudden policy changes in recent weeks has provided relief to investors.
• BI announced several incentives to boost consumer spending, including a 0% merchant discount rate (MDR) for QRIS transactions up to IDR 100,000, effective October 1, for all segments including MSMEs and corporations. In addition, BI launched the national credit card "Kartu Kredit Indonesia." Both incentives, particularly the former, will have a net negative effect on banks’ non-interest income.
• More important, however, is the adjustment to the hedging swap discount to include banks’ offshore borrowing and FDI, not just portfolio inflow transactions. Notably, the inclusion of banks’ offshore borrowing may encourage banks to source more foreign exchange from outside Indonesia. This may also help BI wind down SRBI issuance, which has been draining domestic liquidity. Furthermore, the broader credit impulse from government-driven lending programs could continue to lift import demand. It is an effort to bolster the financial account surplus, in anticipation of a widening current account deficit.
• Loan growth in July accelerated further to 13.6% YoY (from 12.7% YoY in June). There was no mention of deposit growth. However, LDR would rise to approximately 89.2% if deposit growth remained at last month’s pace. This points to tightening liquidity in the banking system, as IndONIA briefly reached 6.30% in July. Even after the Ministry of Finance announced an additional IDR 70 tn SAL (possibly already inclusive of this year’s SILPA) placement in SOE banks in early August, INDONIA quickly rose back to above 6%. Some additional relief may come from the KLM incentives taking effect on September 1, which are expected to inject approximately IDR 50 tn into the system.
• While BI can comfortably hold its rate for now, upward pressure on the BI Rate remains, particularly as the supportive global environment may not persist. Global long-term yields, notably JGBs and USTs, have been rising persistently amid expansionary fiscal policies, exerting upward pressure on global rates broadly. As a result, we project Bank Indonesia to deliver another rate hike this year, bringing the BI Rate to 6.00%.

Versi lengkap report ini (dan report sebelumnya) dapat diakses lewat link berikut: https://s.id/BCA_REI