27 August 2025
Fed Rate Cut Signal: Big Boost for Indonesia Market
Market Commentary
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Last Friday, Fed Chair Jerome Powell signalled plans to cut interest rates in September, confirming expectations that the Fed will ease policy under pressure from Trump.
Lower rates would likely weaken the U.S. dollar through currency debasement, driving capital into higher yielding emerging markets such as Indonesia and making risk assets more attractive.
This environment is highly bullish for the Indonesian market over the next year, with short-term rates expected to approach zero.
The banking sector, particularly large banks like BBCA, BBRI, BMRI, and BBNI, stands to gain from strong foreign inflows, while commodities, especially gold, should benefit from negative real interest rates that encourage investors to hedge inflation.
Our preferred gold plays are BRMS, UNTR, INDY, and MDKA.
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Markets have responded positively to Powell’s dovish stance: on Friday (Aug 22), the S&P 500 and Nasdaq rose +1.52% and +1.54%, while the IDX gained +0.87%, with rate-sensitive sectors such as Finance (+1.87%) and Property (+3.65%) posting notable gains.
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A Fed rate cut could also give Bank Indonesia more room to lower its BI Rate. BI itself projects the Fed will cut rates by a total of 50 bps by year-end. Historically, when rates fall by 2–3%, risk assets tend to rally strongly across the board.
Lower rates would likely weaken the U.S. dollar through currency debasement, driving capital into higher yielding emerging markets such as Indonesia and making risk assets more attractive.
This environment is highly bullish for the Indonesian market over the next year, with short-term rates expected to approach zero.
The banking sector, particularly large banks like BBCA, BBRI, BMRI, and BBNI, stands to gain from strong foreign inflows, while commodities, especially gold, should benefit from negative real interest rates that encourage investors to hedge inflation.
Our preferred gold plays are BRMS, UNTR, INDY, and MDKA.
Markets have responded positively to Powell’s dovish stance: on Friday (Aug 22), the S&P 500 and Nasdaq rose +1.52% and +1.54%, while the IDX gained +0.87%, with rate-sensitive sectors such as Finance (+1.87%) and Property (+3.65%) posting notable gains.
A Fed rate cut could also give Bank Indonesia more room to lower its BI Rate. BI itself projects the Fed will cut rates by a total of 50 bps by year-end. Historically, when rates fall by 2–3%, risk assets tend to rally strongly across the board.
Written by Boris, the Broker
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