10 May 2022 (closed)
Jakarta Composite Index (6,819.79) -89.96 -1.30%
USD/IDR (14,146) -6.00 -0.04%
EUR/IDR (17,335) +57.05 +0.33%
Eric Sugandi, Chief Economist at the Standard Chartered Bank, expects Indonesia’s rupiah to have depreciated to IDR 13,900 per US dollar by the end of the year from IDR 13,339 currently (29/06) due to the impact of the bullish US dollar ahead of monetary tightening in the USA and the looming Greek exit from the Eurozone. Actually, this is a conservative prognosis. In case Indonesia’s central bank does not raise its benchmark interest rate (BI rate), currently at 7.50 percent, pressures on the rupiah may increase in fact increase further.
However, Sugandi said it is most likely that Indonesia’s central bank (Bank Indonesia) will raise the BI rate by 25 basis points to 7.75 percent later this year when the US Federal Reserve introduces higher borrowing costs. Another interest rate cut this year is highly unlikely as the rupiah has been under severe depreciating pressures. The last time Bank Indonesia cut its BI rate was in February 2015 (25 basis points). Sugandi expressed these views during a panel discussion on "Challenges and Opportunities in Developing Midsized Companies in Indonesia" in Jakarta on Monday (29/06).
Moreover, Indonesian inflation has been accelerating in recent months and may touch 7.40 percent (y/y) in June 2015 due to the impact of the Ramadan month, thus further limiting room for the central bank to cut its interest rate regime.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.13 percent to IDR 13,356 per US dollar on Monday.