Bank Indonesia surprised markets by holding the BI-Rate at 5.75% in October, prioritizing rupiah stability amid rising external pressures. While the policy rate remains unchanged, the widening US–Indonesia yield dynamics and persistent currency pressure highlight the challenge of maintaining capital inflows without further tightening. BI has therefore strengthened its policy mix by raising the deposit facility rate and increasing DNDF premium discounts to make hedging instruments more attractive, while lowering reserve requirements to support banking liquidity. These measures aim to stabilize the rupiah and preserve domestic liquidity, although higher oil prices, elevated US Treasury yields and expectations of tighter Fed policy keep the risk of a BI rate hike before year-end in focus.

Domestic credit growth remains solid despite some moderation, while the MSCI-related market turmoil has added pressure on the rupiah. Bond yields have remained relatively resilient, suggesting that spillover risks are still manageable. Nevertheless, sustained currency weakness and tighter global financial conditions could limit foreign inflows and keep market sentiment cautious.

On the banking front, BMRI delivered strong 9M26 earnings growth, supported by lower provisioning and disciplined cost management. While tight liquidity continues to pressure funding costs and margins, improving loan yields could help stabilize profitability. Asset quality remains broadly resilient despite a higher loan-at-risk ratio, with management expecting credit costs to stay within its guidance.

We maintain HOLD on BMRI, reflecting stronger earnings expectations and a more supportive outlook for funding costs. Although improving loan yields provide some upside, persistent liquidity constraints and macroeconomic uncertainty warrant a selective approach. Investors should continue prioritizing fundamentally resilient stocks while monitoring rupiah stability and further policy developments.