Bank Indonesia Seen Raising Rates to 6% as Rupiah Weakness Tests Macro Stability
Updated
Updated · mufgresearch.com · Jul 20
Bank Indonesia Seen Raising Rates to 6% as Rupiah Weakness Tests Macro Stability
3 articles · Updated · mufgresearch.com · Jul 20
Summary
Bank Indonesia is expected to lift its policy rate by 25 basis points to 6% at Wednesday’s meeting, with markets focused on its response to pressure on the rupiah and local assets.
USD/IDR has recently moved below 17,900 after a short rebound, but analysts still expect the rupiah to weaken back above 18,000 over time and see another hike to 6.25% by end-2026.
229 trillion rupiah is the likely revised budget for President Prabowo’s free meals program, down from 268 trillion, in a step investors read as an effort to curb fiscal slippage and reassure markets.
More than $1 billion in planned Panda bond issuance and Bank Indonesia’s pullback from local bond buying have also supported sentiment, though concerns persist over policy uncertainty, oil-driven fiscal risks and a possible threat to Indonesia’s BBB rating.