To Infinity and Beyond

April 22, 2026

Elias Haddad

Ceasefire extended indefinitely. No policy-relevant economic data releases today.

UK March CPI validates BOE rate hike bets. We disagree.

Bank Indonesia stands pat. IDR remains under downside pressure.

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Brent crude oil prices are holding on to yesterday’s gains near $100 a barrel. US equity futures are up, global bond markets are stable, and USD pared back some of yesterday’s upswing.

The risk-on rally faces resistance as the energy shock lingers, even if the worst has likely passed. US President Donald Trump extended the ceasefire “until such time as their leaders and representatives can come up with a unified proposal”. Meanwhile, The UK Navy said two ships were fired at near the Strait of Hormuz.

GBP/USD is treading water near 1.3500. Persistently above target UK inflation leaves the BOE with little room to look through the energy shock. In line with consensus, headline inflation quickened to 3.3% y/y vs. 3.0% in February on higher prices for motor fuels. Core inflation (excluding energy, food, alcohol and tobacco) unexpectedly slowed to 3.1% y/y (consensus: 3.2%) vs. 3.2% in February and services inflation rose to 4.5% y/y (consensus: 4.3%) vs. 4.3% in February.

The UK swaps curve adjusted higher following the CPI report to imply greater odds of nearly 50bps of rate hikes over the next twelve months. BOE rate hike bets are still too rich in our view given excess slack in the economy. The BOE estimates a negative output gap of -1% of GDP in 2026. Bottom line: GBP/USD will likely trade within a 1.3400 and 1.3700 range in the near term.

INDONESIA

USD/IDR is up near record highs around 17’200. As was widely expected, Bank Indonesia (BI) kept the policy rate unchanged at 4.75% for a seventh consecutive meeting. Governor Perry Warjiyo stressed “Bank Indonesia is prepared to implement a further strengthening of monetary policy as needed to maintain the stability of the rupiah exchange rate.”

BI has ramped up intervention in the past few months to slow the slide in IDR. The negative terms of trade shock from higher energy prices and the possibility MSCI reclassifies Indonesia from an emerging to a frontier market in May are weighing on IDR.

Nonetheless, Indonesia is not in a 1998-style crisis. The current account is in balance, foreign exchange reserves are ample (equivalent to 6.4 months of imports, double the international adequacy standard), inflation is within target of 2.5±1%, and real GDP growth is resilient (5.39% y/y in Q4 2025, the fastest since Q3 2022).

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