Indonesia: BI Steps Up FX Defence, But USDIDR Upside Risks Persist

Bank Indonesia has initiated a 25bps rate hike and introduced measures to stabilise the rupiah. Despite these actions, persistent external pressures and geopolitical risks maintain upward pressure on USDIDR.

Key Takeaways

• 1.Bank Indonesia implemented an off-cycle 25bps rate hike and FX stabilisation measures to support the rupiah amid liquidity concerns.
• 2.Despite policy tightening, USDIDR upside risks persist due to Middle East tensions, elevated US yields, and narrowing trade surpluses.
• 3.Further tightening is anticipated, with another 25bps hike likely by Q3 to anchor inflation and stabilise the currency.

Table of Contents

• Key Points
• Policy Outlook: Bias Toward Further Tightening
• Near-term reprieve for rupiah, but risks skewed to downside
• Disclaimer

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