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BI watching Trump impact to assess monetary policy options
Bank Indonesia (BI) is watching economic policy changes in the United States that may affect Indonesia and will determine on that basis whether a shift in its monetary policy stance is needed.
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Navigating global uncertainty: Bank Indonesia's name and logo are displayed above a projector screen at the central bank's headquarters in Banda Aceh, Aceh, on Feb. 7, 2025. (JP/Deni Ghifari)
B
ank Indonesia (BI) says it is ready to adapt to changing economic policies in the United States under President Donald Trump that may affect Indonesia, but it has not concluded so far that a shift in its monetary policy stance is needed.
The director of the central bank’s economic and monetary policy department, Juli Budi Winantya, told reporters at a BI seminar in Banda Aceh that stability in the rupiah’s exchange rates and inflation, as well as “the need to spur economic growth”, were the main factors determining rate decisions.
“We will see how [Trump’s economic policies] will affect those three factors,” said Juli on Friday. “[In the meantime], the considerations will remain the same, but the Board of Governors Meeting will keep a close watch on the dynamics.”
Given the US’ significance and foothold in the global economy, Washington’s economic directives tend to have direct effects on emerging economies, including Indonesia, particularly with regard to the value of their currencies against the US dollar.
When Trump announced a salvo of tariffs on Canada, Mexico and China on Feb. 1, the rupiah weakened by close to 1 percent over the weekend when the market reopened, only to bounce back by about the same amount when the US president decided to put the plan on hold for Canada and Mexico.
The reaction of forex markets was so strong because the scale of tariffs suggests the world is entering a new stage of trade wars, with all the uncertainty that spells for investments, prompting the withdrawal of funds from emerging markets and from developed economies seen to be on the receiving end of US trade policies.
As investors shifted those funds toward US dollar assets, seen as a safe haven, other currencies, including the rupiah, weakened.
