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BI reassures markets on rupiah stability as Mideast conflict heats up
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Bank Indonesia (BI) Governor Perry Warjiyo is sworn in for a second five-
year term at the Supreme Court in Central Jakarta, on May 24, 2023. (Antara/Galih Pradipta)
B
ank Indonesia (BI) has issued a statement that seeks to alleviate concerns about a weakening rupiah as the United States dollar is propped up by the American economy as well as by Iran and Israel trading blows.
Speaking at the International Monetary Fund (IMF) and World Bank spring meetings at the IMF headquarters in Washington, DC, BI Governor Perry Warjiyo said his institution was "ensuring that rupiah stability will be maintained through foreign exchange intervention and other necessary steps”, according to a press statement released by the central bank on Friday.
The statement listed several additional policy tools, namely foreign portfolio flow management and “pro-market” monetary operations “integrated with financial market deepening”.
Perry’s speech comes days after the rupiah stooped to a new 2024 low against the greenback, which has remained past the psychological threshold of Rp 16,000 for a week.
Some analysts see the Indonesian currency headed for a “historic low”, even though they expect that to be short-lived.
The depreciation has been fueled by two global events, namely the US Federal Reserve signaling it will keep its key interest rates higher for longer and geopolitical tension exacerbated most recently by attacks between Iran and Israel.
After assessing recent macroeconomic data on inflation, job growth and retail spending, all of which veered from expectations, the Fed has signaled that its restrictive monetary policy needs to be maintained longer, which analysts took to mean a cut in the federal funds rate was not expected before September, if at all this year.
