• Bank Indonesia (BI) kept the BI Rate unchanged at 5.75% at its Sept-26 meeting, marking  the third consecutive meeting of policy rate stability. The decision was notable given that several major  central banks, including the Fed, ECB, and BoJ, raised their policy rates in Sept-26. 
• The increase in foreign capital inflows into SBN (+IDR 7 Tn following the Fed rate hike) and the Rupiah  remaining below the psychological level of 17,900–18,000 were key factors behind BI’s decision to keep  the BI Rate unchanged. This also reflects BI’s confidence in its hedging incentive policy. Accordingly,  BI further increased hedging incentives for swap and DNDF transactions. 
• More important, however, is the change in the hedging policy mechanism, with incentive rates now  differentiated by tenors (3, 6, and 12 months). Notably, higher incentives for longer tenors may  encourage FX to remain in the domestic financial system for longer amid global competition for liquidity.  This may also help preserve FX liquidity amid rising import payment needs, particularly for energy and  capital goods related to government programs. Ultimately, it is an effort to bolster the financial  account surplus on a sustained basis, in anticipation of a widening current account deficit. 
• In line with this, BI continues to support growth and exchange rate stability without raising  interest rates. Credit growth continued to accelerate to 13.65% YoY in August (from 13.58%), while  slower deposit growth, at 10.94% YoY from 11.2%, suggests that banking liquidity remains tight.  Despite remaining above the BI Rate, BI’s liquidity injections through KLM PPU and repo facilities have  helped gradually bring IndONIA below 6%. Meanwhile, the government’s commitment to maintain IDR  200tn in SAL placements through July 2027 provides additional room for BI and SOEs banks to adjust  liquidity conditions. 
• While BI still has room to keep the BI Rate unchanged, pressure on the Rupiah remains. First, higher  global rates could increase the appeal of offshore assets. Second, higher global oil prices, El Niño risks,  and faster credit growth could add to inflationary pressures, potentially pushing yields higher. The key  question is whether hedging incentives can sufficiently offset risk perceptions and preserve the  attractiveness of Indonesian assets. Against this backdrop, we still see a case for BI to raise rates  at least once or twice more. 

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