Liquidity support improves market conditions

The move aimed to highlighted government's commitment to preserving adequate liquidity amid still-strong credit demand, with bank lending growing 11.5% YoY as of May-26. In our view, the decision underscores increasingly close fiscal-monetary coordination to support credit intermediation, maintain financial system liquidity, and complement BI's broader stabilization efforts, while ensuring sufficient funding capacity for continued economic expansion without undermining Rupiah stability.

The government and BI reaffirmed stronger fiscal-monetary coordination as a key pillar for preserving market stability, with BI reporting around USD9bn of foreign inflows into SBN and SRBI following the 100bps cumulative BI Rate hike in 1H26, driven by the repricing of domestic financial assets and improving investor confidence. At the same time, BI expanded its monetary operations to IDR1,000tr by end-Jun-26 from IDR600tr in May-26 to maintain ample liquidity and stabilize money and FX markets amid persistent global uncertainty. In our view, the combination of competitive domestic yields, ample liquidity provision, and closer policy coordination should continue to support Rupiah stability and sustain portfolio inflows, although maintaining investor confidence will remain dependent on consistent policy communication, fiscal credibility, and the government's commitment to structural reforms.