Dovish Wave from Jackson Hole Symposium
GLOBAL ECONOMY:
Federal Reserve Chair Jerome Powell struck a cautiously optimistic tone in his final Jackson Hole speech, signaling that evolving risks in the labor market, especially the marked slowdown in both hiring and labor force growth could justify a policy adjustment as early as the Fed’s September meeting. He emphasized that despite stable unemployment, downside risks to jobs are rising, warranting vigilance. At the same time, persistent inflation partly fueled by tariffs remains a concern, but Powell expressed growing confidence that these price pressures may be temporary. Ultimately, he underscored that any decision to ease monetary policy will adhere strictly to economic data, reinforcing the Fed’s independence.
In tandem with his comments, Powell announced a revised long-term monetary policy framework. The Fed is moving away from the previous “makeup” strategy and “effective lower bound” narrative, shifting instead to a more flexible inflation-targeting approach designed for a broad range of economic conditions. The updated framework reiterates the Fed’s dual mandate maximum employment and price stability while emphasizing that forward-looking policy must balance these goals without preset commitments.
This recalibrated strategy reflects lessons from the rapid inflation surge post- pandemic and acknowledges that very low interest rates may no longer define the economic landscape. The update restores emphasis on balancing employment and inflation objectives without rigid commitments and removes language that previously complicated communication, such as indicators of “shortfalls” in employment. We read this as a very dovish comment, while the policy is somewhat tilting toward inflationary bias which are negative for USD and good for EM Asset.
Over the past week, China’s economy showed a mix of resilience and structural pressure points. The People’s Bank of China held its benchmark lending rates steady1-year LPR at 3.0% and 5-year LPR at 3.5%, signaling a preference for selective, targeted stimulus rather than broad monetary easing, even as signs of slowing industrial output, sluggish retail sales, and a continued real estate slump weigh on growth.
Dollar Index subsequently lower to 98.00 level post the announcement. Next week, market will be waiting for further clarification on US inflation data.
DOMESTIC ECONOMY:
From domestic economy, In 2Q25, CA Deficit was recorded at –USD3.01bn or -0.8% of GDP (TRIM: -USD2.00bn, cons: -USD2.83bn, prev: -USD0.23bn). The primary contributor was imports, which saw +USD4.4bn increase, mainly due to capital goods (curr: +31.9% y-y, prev: +12.3% y-y). SRBI maturity are driven negative Financial Account. We expect Financial account to improve in 3Q25 driven by more non-IDR bond issuance.
From monetary side, BI-Rate was cut to 5.00% (TRIM: 5.00%, cons: 5.25%, prev: 5.25%) in the Aug meeting. Overnight deposit and lending facility rates were lowered as well to 4.25% (prev: 4.50%) and 5.75% (prev: 6.00%), respectively. BI continue to maintain their dovish stance, by indicating that they are watching room for rate cut, while providing guidance that inflation to stay low at least until 2026. We expect continued strong IDR and financial stability together with sub-par inflation to allow for further rate cut. We maintain our non-consensus call for 4.5% BI rate at 2025 year end (curr: 5.00%) and USDIDR to be at 15,500 this year end.
DOMESTIC BOND MARKET:
Govt. bond ownership flow:
As of 20 Aug’25, banks recorded an outflow of -IDR6.3tn w-w to the govt. bonds, making up to IDR1,297tn or ~20.3% of total ownership in the govt. bonds. On the other hand, the central bank recorded an inflow of +IDR2.8tn w-w to the total IDR1,558tn or ~24.4% of total ownership in the govt. bonds. From the non-bank investor classification, outflow was recorded at -IDR42.0tn w-w to the total of IDR3,520tn or ~55.2% ownership from total. Meanwhile, foreign investors saw an inflow of +IDR11.1tn w-w this week to the total of IDR952tn or ~14.9% of govt. bond ownership to total.
Important event next week
· Sat (23/08): –
· Sun (24/08): –
· Mon (25/08): (USA) New Home Sales
· Tue (26/08): (USA) Conf. Board Consumer Confidence, Durable Goods Order
· Wed (27/08): (USA) MBA Mortgage Applications
· Thu (28/08): (USA) Initial Jobless Claims, GDP Annualized QoQ
· Fri (29/08): (USA) U. of Mich. Sentiment, Personal Income, Personal Spending, MNI Chicago PMI, Wholesale Inventories MoM, (Japan) Industrial Production MoM, Jobless Rate, Tokyo CPI Ex-Fresh Food YoY, Job to Applicant Ratio
PT Trimegah Sekuritas Indonesia, Tbk.
