Market Braces for Central Bank’s Rate Decision Amid Rupiah Weakening

Economists believe that Bank Indonesia will likely hold rates at the upcoming board of governors meeting (RDG) on Wednesday (24/4/2024) amid rupiah fluctuations.

Editorial Team

24 Apr 2024 - 22.31
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Market Braces for Central Bank’s Rate Decision Amid Rupiah Weakening

Illustration - Bank Indonesia head office, Jakarta./Bisnis-Abdullah Azzam.

Bisnis, JAKARTA — The US central bank is signaling a delay in rate cuts, and the rupiah’s weakening will create a dilemma for Bank Indonesia (BI) in maintaining currency stability. Economists believe BI will likely hold its key rate at the upcoming board of governors meeting (RDG) on Wednesday (4/24/2024) due to the strengthening dollar and inflation, reinforcing a higher-for-longer policy.

In the previous RDG last month, BI was also predicted to keep its hawkish rates. Bank Permata’s Chief Economist, Josua Pardede, estimates that the central bank will keep its key rate, or BI-Rate, at 6 percent.

According to Josua, BI still has sufficiently strong ammunition to hold off further rupiah weakening. This is supported by relatively high foreign exchange reserves, enabling BI to continue intervening in the foreign exchange market.

Josua explained that the rupiah's recent depreciation over the past few weeks was due to solid US economic indicator data, potentially delaying the Federal Reserve (Fed)’s rate cuts from June to September 2024.

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