USD/IDR: No catalyst yet for sustained gain in the Indonesian Rupiah – MUFG

Economists at MUFG Bank look for Bank Indonesia (BI) to cut its policy rate only after the US Fed loosens its monetary policy to avoid unnecessary Rupiah (IDR) volatility.

Rupiah outlook holds the key to BI rate cuts 

Indonesia’s economy will likely remain on a steady footing this year and inflation to stay within BI’s target, leaving the stability of the exchange rate as the key factor in determining the timing and pace of BI rate cuts. 

We look for BI to cut its policy rate only after the US Fed loosens its monetary policy to avoid unnecessary Rupiah volatility. For now, we see the BI lowering its policy rate by 50 bps to 5.50% in H2 2024.

We see no catalyst yet for sustained gain in the Indonesian Rupiah versus the US Dollar in the near term. 

Our three-month USD/IDR forecast stays at 15,850.