Bank Indonesia Stands Guard on Rupiah Movement

The recent weakening of the rupiah exchange rate and the increase in inflation due to rising rice prices have limited Bank Indonesia's (BI) ability to immediately lower interest rates.

Sri Mas Sari

22 Sep 2023 - 18.21
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Bank Indonesia Stands Guard on Rupiah Movement

An employee shows United States dollar banknotes in Jakarta, Tuesday (5/9/2023). Photo/Bisnis/Eusebio Chrysnamurti

Bisnis, JAKARTA—The recent weakening of the rupiah exchange rate and the increase in inflation due to rising rice prices have limited Bank Indonesia's (BI) ability to immediately lower interest rates.

BI decided to maintain the BI-7 Day Reverse Repo Rate at 5.75% for the eighth time in response to these concerns, aligning with market expectations.

This decision was influenced by worries about the rupiah's stability, particularly after the Federal Reserve signaled its intention to raise interest rates once more this year, potentially aligning interest rates in the US and Indonesia.

According to transaction data during September 11 - 14, 2023, non-resident investors in the domestic financial market made net sales of IDR 4.45 trillion. This included net sales of IDR 3.98 trillion in Government Securities (SBN) and net sales of IDR 0.47 trillion in the stock market. Consequently, the rupiah has weakened, appreciating only 1.2% YtD as of September 20, compared to 1.78% as of August 23.

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