Fed Holds Interest Rates, Economists See Signal of Future Policy Shift

Jakarta (ANTARA) -

Head Economist at Trimegah Sekuritas Indonesia, Fakhrul Fulvian, views the US central bank’s, the Fed’s, decision to hold interest rates as a signal of a change in global policy approach moving forward.

This projection is reinforced by discussions around figures like Kevin Warsh, who tend to bring a policy approach more based on realisations rather than forward guidance.

“If global policy shifts to being less forward-looking and more reactive to actual inflation realisations and risks, then volatility will become the new normal. This means countries like Indonesia must be far more agile and firm in maintaining stability,” Fakhrul told ANTARA in Jakarta on Thursday.

Previously, the Fed held interest rates in the range of 3.5 percent to 3.75 percent on Wednesday (29/4/2026).

The Fed’s decision to hold interest rates again underscores that global uncertainty remains the primary reality that all countries, including Indonesia, must face.

Fed Chair Jerome Powell indicated an increasingly cautious approach, a signal that inflationary pressures and global risks have not fully subsided.

In the domestic context, Fakhrul emphasised that the rupiah is currently in an overshooting phase, a condition where exchange rate pressures move beyond short- and medium-term fundamentals and are in the process of finding a new equilibrium point.

“The rupiah is currently in an overshooting phase, seeking its new stability amid global pressures. In such a phase, the market needs clear signals that authorities are ready to maintain stability. Once BI shows readiness to implement monetary tightening, get ready for the rupiah to strengthen again,” Fakhrul explained.

Therefore, he believes that Bank Indonesia (BI) needs to start showing a stronger tightening bias as part of efforts to maintain credibility and dampen external pressures.

“A hawkish response from Bank Indonesia is important, not just to withstand exchange rate pressures, but also to manage market expectations. This is not about chasing the Fed, but about maintaining trust in domestic stability,” he stated.

Meanwhile, on the fiscal side, Fakhrul highlighted the importance of certainty in the direction of the state budget (APBN), including adjustments to priority programmes such as Free Nutritious Meals (MBG). The government’s steps towards rationalisation and calibration of spending that have begun are a positive signal for the market.

“Budget adjustments, including in the MBG programme, show that the government is responsive to fiscal dynamics and not trapped in rigidity. This is important for maintaining APBN credibility amid increasing global pressures,” he said.

Furthermore, he stressed that the market currently needs clarity on fiscal targets and financing strategies, especially in the context of potential pressures from energy prices and domestic spending needs.

“Certainty on APBN targets is key. The market must see that the government has room and flexibility to make adjustments without sacrificing fiscal discipline. This will be the main anchor of investor confidence,” he said.

Furthermore, Fakhrul added that various reforms that have been underway, both in the fiscal sector and financial markets, are starting to show positive impacts, although not yet fully reflected in short-term market stability.

“Reforms that have been carried out—both in terms of market transparency, fiscal management, and policy coordination—must continue to be communicated consistently and measurably; don’t let the market and society be left in the dark. This is important so that the market understands that Indonesia’s economic foundations remain strong amid global volatility,” he added.

The synergy between Bank Indonesia and the Ministry of Finance is now entering a more decisive phase, where policies must not only be right but also appear credible and ready for execution.

“Society and the market currently need not only the right policies, but also certainty that those policies will be implemented with discipline and flexibility. Prudence by policymakers is key to maintaining stability as well as confidence,” he explained.

Fakhrul also emphasised that the world today no longer offers the luxury of certainty, so the ability to adapt becomes a determining factor in the success of economic policies.

“We cannot wait for the world to stabilise to act. It is precisely in this uncertainty that firmness and prudence must go hand in hand. Because stability does not come from a calm world, but from policies ready to face the storm,” he concluded.