Rupiah Weakness Persists Ahead of BI Rate Decision

The Indonesian rupiah traded around IDR 16,975 per dollar on Tuesday afternoon, after briefly touching an intraday low of 17,000. The move followed Bank Indonesia’s decision to keep its key rate unchanged at 4.75%, in line with consensus, as the Middle East conflict heightens risks to the outlook. Rising energy prices have fueled concerns about a potential inflation shock, particularly for Indonesia, which relies heavily on imported Middle Eastern oil and has limited buffers against supply disruptions. Governor Perry Warjiyo said the rate hold reflects efforts to support the rupiah and keep inflation within target, noting the conflict has already pressured the currency. He added that the central bank has stepped up forex intervention to curb volatility, both in spot and forward markets. Warjiyo kept the 2026 growth outlook at 4.9%–5.7% and expects Q1 GDP growth to improve from the prior quarter. Globally, the dollar index held firm near 99.9 ahead of the upcoming Fed’s rate decision.

The Indonesian rupiah edged closer to IDR 17,000 per dollar on Tuesday, declining for a sixth session as the U.S. dollar stayed firm amid elevated global energy prices before the Fed’s policy decision. Indonesia remains vulnerable to higher energy costs as a net oil and gas importer, though authorities have pledged to keep subsidized fuel prices unchanged through the Eid holiday. Persistently high oil prices, however, could force adjustments later. Inflation in February hit a near three-year high of 4.76%, above Bank Indonesia’s target, driven largely by base effects from last year’s electricity tariff discounts. The central bank is set to announce its policy decision later today, with markets expecting a sixth consecutive rate hold. Still, speculation over further easing lingers after a total of 150bps of cuts since September 2024, aimed at supporting growth following disruptions in Sumatra. The economy grew 5.11% in 2025, below the 5.2% target, with 2026 growth projected at 5.4%.

The Indonesian rupiah moved toward IDR 17,000 per dollar on Monday, sliding for a fifth straight session as broad U.S. dollar strength weighed. The greenback firmed on rising global energy prices, which stoked inflation concerns and tempered expectations of near-term Fed rate cuts. As a net oil and gas importer, Indonesia remains exposed to higher energy costs. Authorities signaled subsidized fuel prices will stay unchanged through the Eid holiday, though persistently elevated oil prices could force policy shifts. Inflation accelerated to 4.76% in February, a near three-year high and above Bank Indonesia’s target, largely due to base effects from last year’s electricity tariff discounts. Governor Perry Warjiyo projected inflation will stay mild in 2026–2027, leaving scope for further easing after 150bp of cuts since September 2024. BI began its policy meeting today, with a decision due Tuesday. Still, active intervention in spot and forward markets helped limit the rupiah’s slide.