JAKARTA – The Federal Reserve is signaling an end to its quantitative tightening (QT) program, slated for December 1, 2025. Quantitative tightening is a monetary policy tool employed by the Fed to tighten its balance sheet by reducing its holdings of government bonds and mortgage-backed securities, effectively absorbing liquidity from the market.
Consequently, the cessation of the QT program suggests a shift towards a neutral or even expansionary phase for the Fed, indicating a forthcoming increase in global liquidity.
Ronny P. Sasmita, Senior Analyst at the Indonesia Strategic and Economics Institution (ISEAI), explains that the Fed’s halt to QT fundamentally signifies a reversal in the direction of global monetary policy.
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As the Fed’s balance sheet begins to ease again, the supply of US dollars in global financial markets is expected to increase. This situation, according to Sasmita, typically triggers a “search for yield,” where global investors seek assets with higher returns, often found in emerging markets.
“For Indonesia, this has the potential to be a positive catalyst for portfolio inflows into the bond and stock markets, especially since Indonesia still offers an attractive yield spread compared to US Treasuries, coupled with relatively stable macroeconomic conditions. The impact could be seen in the strengthening of the Rupiah and a decrease in long-term government bond yields,” he told Bisnis on Thursday, November 13, 2025.
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Sasmita adds that the return of global liquidity will generally support interest rate sensitive and growth-oriented sectors. Within Indonesia, financial sectors such as banking and multi-finance are poised to benefit, as lower yields stimulate loan demand and boost financial asset valuations.
Furthermore, he believes that consumer cyclical and property sectors could also receive a positive boost as interest rates stabilize and domestic consumption increases.
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“From a capital market perspective, export-based commodity sectors like nickel, coal, and CPO could also attract investor interest, as global price prospects improve with increased global economic activity resulting from liquidity easing,” Sasmita elaborated.
Despite these promising opportunities, Sasmita notes several risks that warrant careful consideration. Firstly, the uncertainty surrounding the future direction of monetary policy. Should US inflation resurge, the Fed could potentially postpone further easing.
Secondly, global geopolitical risks, such as the Middle East conflict or tensions in the South China Sea, could trigger a risk-off sentiment, putting pressure on emerging market assets.
Additionally, domestic factors like the fiscal deficit, exchange rate stability, and political dynamics leading up to the new fiscal year could influence investor risk perception.
“Therefore, while the direction of capital flows appears positive, volatility will remain high and needs to be balanced with credible domestic policies and strong monetary-fiscal coordination,” he concluded.
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Summary
The Federal Reserve is signaling an end to its Quantitative Tightening (QT) program by December 1, 2025, which indicates a shift towards a more expansive global monetary policy and an increase in global liquidity. This reversal is expected to raise the supply of US dollars in financial markets, prompting global investors to seek higher returns in emerging markets, a phenomenon known as “search for yield.”
For Indonesia, this presents a positive catalyst for portfolio inflows into its bond and stock markets, potentially strengthening the Rupiah and decreasing long-term government bond yields due to attractive yield spreads and stable macroeconomic conditions. Sectors such as banking, multi-finance, consumer cyclical, property, and export-based commodities are poised to benefit. However, risks remain, including uncertainty in future US monetary policy, geopolitical tensions, and domestic factors like fiscal deficits, requiring credible domestic policies and strong monetary-fiscal coordination to manage potential volatility.