Indonesia’s c. bank vows rupiah defence

Indonesia’s central bank, Bank Indonesia (BI), plans to intervene in the foreign exchange market to support the rupiah, Reuters reported on Wednesday citing Governor Perry Warjiyo.

He is optimistic about the rupiah’s future and expects it to strengthen next year. The rupiah recently hit a four-year low of 16,290 per dollar but has since improved to around 16,265.

Warjiyo emphasised BI’s commitment to rupiah stability during a parliamentary meeting discussing economic assumptions for the 2025 budget. He highlighted past interventions and a recent interest rate hike as measures to counter capital outflows amid global economic challenges.

He expects the rupiah to trade between 15,700 to 16,100 per dollar for the rest of 2024, with a more positive outlook for 2025 at 15,300 to 15,700. This is based on anticipated US Federal Reserve rate cuts later in 2024 and the first half of 2025.

BI predicts a 25-basis point rate cut by the end of 2024, followed by an additional 50 basis points in the first half of 2025.

In April, BI surprised markets with a rate hike to support the rupiah. However, they opted to hold rates steady last month due to controlled inflation and a stabilised rupiah. The next policy meeting is scheduled for June 19th and 20th.