IHSG Strengthens While Rupiah Weakens Amid Interest Rate Hike Expectations
The Indonesia Composite Index (IHSG) on the Indonesia Stock Exchange (IDX) moved upwards on Thursday morning, as investors continued to closely monitor the direction of global benchmark interest rate policies. Meanwhile, the Rupiah weakened by 26 points or 0.14 per cent to Rp 17,978 per US dollar.
The IHSG opened 14.72 points or 0.26 per cent higher at 5,709.84. Simultaneously, the group of 45 blue-chip stocks, known as the LQ45 Index, rose 2.57 points or 0.46 per cent to 559.32.
“Based on technical analysis, we see that the IHSG has the potential for limited gains with a support level of 5,320 and resistance at 5,735. A correction is still possible, so investors should remain cautious,” said Maximilianus Nico Demus, Associate Director of Research and Investment at Pilarmas Investindo Sekuritas, in his analysis in Jakarta on Thursday (2/7/2026).
Internationally, during a meeting of the European Central Bank (ECB) Banking Forum, Fed Chair Kevin Warsh stated that inflation risks have decreased in recent weeks, with the inflation target remaining at the 2 per cent level.
Warsh noted that inflation expectations for the first four weeks have declined again, aligning with the Fed’s focus on maintaining price stability. As the Fed does not raise interest rates, bond yields have not increased and have even tended to decrease. The Fed assesses that the inflation increase in the previous year was merely temporary.
“This is because energy and petrol prices are currently continuing to decline following good news regarding the agreement between the United States (US) and Iran,” said Nico.
Furthermore, Warsh reminded that the Fed remains independent despite US President Donald Trump’s desire for lower interest rates. Warsh stated that the Fed would have a new policy direction, though he did not elaborate further.
“The latest projections show that 18 Fed officials anticipate an interest rate hike this year,” Nico added.
Domestically, the Central Bureau of Statistics (BPS) reported that June 2026 inflation reached 0.44 per cent month-on-month, 1.79 per cent year-to-date, and 3.34 per cent year-on-year. The rise in inflation was influenced by seasonal factors, rising raw material prices, and an increase in fuel prices.
Additionally, BPS reported that Indonesia’s trade balance experienced a deficit of US$1.61 billion in May 2026. This marks the first deficit in the last six years, after import values reached US$24.81 billion, surpassing export values of US$23.20 billion.
“Pressure on Indonesia’s external sector is beginning to increase, primarily due to slowing exports amidst weakening global demand and falling prices for several key commodities,” said Nico.
On the other hand, the rise in imports reflects the continued strength of domestic demand for raw materials, capital goods, and energy. If the increase in imports is dominated by raw materials and capital goods, the condition can still be viewed positively as it supports production and investment activities.
Nico stated that if the export weakening trend continues in the coming months, the trade surplus that has traditionally supported the stability of the Rupiah exchange rate and foreign exchange reserves could potentially shrink.
“Nevertheless, because the trade balance from January to May 2026 still recorded a surplus, the impact on Indonesia’s economic fundamentals is expected to remain limited,” Nico noted.
In Wednesday’s (1/7/2026) trading, European markets moved variably. The Euro Stoxx 50 index fell 0.70 per cent, the UK’s FTSE 100 fell 0.18 per cent, the German DAX rose 0.18 per cent, while the French CAC 40 fell 0.79 per cent.
Wall Street also showed mixed movement. The Dow Jones Industrial Average fell 0.03 per cent, the S&P 500 fell 0.20 per cent, and the Nasdaq Composite fell 1.54 per cent.
Meanwhile, Asian stock markets moved diversely on Thursday morning. The Nikkei index rose 1.55 per cent to 19,733.00, the Shanghai index fell 0.83 per cent to 4,078.00, the Hang Seng fell 1.15 per cent to 23,144.00, and the Straits Times index rose 0.49 per cent to 5,186.00.