The Indonesian rupiah hovered around IDR 17,850 per US dollar on Wednesday, little changed from the previous session, as markets awaited Bank Indonesia’s interest rate decision later in the day. Policymakers are widely expected to raise the benchmark rate by 25 bps—on top of a cumulative 75 bps of tightening since May—to support the rupiah and anchor inflation expectations.
While a tighter policy stance is likely to help stabilise the currency, higher borrowing costs risk putting additional pressure on domestic demand. Investors also assessed local reports of a new stimulus package targeting lower-middle-income households, alongside indications that subsidised fuel and LPG prices will remain unchanged.
At the same time, Jakarta has reduced funding for the flagship Free Meal Program by about IDR 67 trillion as President Prabowo prioritises fiscal consolidation and efficiency. Externally, the US dollar remained firm after the Federal Reserve left interest rates on hold but signalled growing support for possible hikes later this year, limiting gains for emerging-market currencies, including the rupiah.
