OJK: Market Expectations for Fed Rate Cuts in 2026 Dashed Due to Iran War

Jakarta – OJK Chairwoman Friderica Widyasari Dewi, also known as Kiki, stated that the escalation of the Iran war has dashed market expectations for a Federal Reserve interest rate cut in 2026. Previously, the Fed had signalled at least one rate cut this year to maintain its policy rate. However, the impact of the Iran war has exerted significant pressure on the US economy, amid persistent inflation and rising unemployment levels. “Following the escalation of the Iran conflict, market expectations have shifted to a scenario of no Fed rate cuts in 2026,” Kiki said during a press teleconference following the OJK’s Monthly Commissioners’ Meeting for March 2026, on Monday, 6 April 2026. In contrast, Kiki noted that China’s economy has recorded performance above expectations, driven by improvements in demand and supply sides, as well as support from financial sector stimulus. Nevertheless, China is reported to lower its economic growth target in response to ongoing structural challenges and persistent external uncertainties. Meanwhile, on the domestic economy front, Kiki conveyed that core inflation in March 2026 was recorded to have declined. Consumer activity remains strong at the start of the year. “This is reflected in retail sales growth estimated at 6.89 per cent year-on-year (yoy), as well as solid motor vehicle sales performance,” Kiki stated. From the supply side, Kiki assured that the manufacturing PMI is still in an expansive condition. “From the perspective of external resilience, national foreign exchange reserves in February 2026 are at an adequate level, and the trade balance continues to record a surplus,” she added.