Indonesia’s central bank will continue to intervene in the foreign exchange market to stabilize the rupiah, its governor said on Wednesday, adding that the currency would strengthen next year.
The rupee recovered some of its losses on Wednesday to settle at 16,265 per dollar at 0603 GMT, after weakening 0.46% to 16,290, its lowest level in four years.
Governor Perry Warjiyo’s comments were made during a meeting of parliament to discuss economic assumptions for next year that will be used to prepare the 2025 budget.
“Amidst the global turmoil, we continue our efforts to maintain the rupee exchange rate by intervening in the foreign exchange market and increasing the central bank rate to prevent capital outflows,” Warjiyo said.
Mr. Warjiyo reiterated his projection that the rupiah is expected to trade in a range of $15,700 to $16,100 this year, while expecting it to strengthen further next year to between $15,300 and $15,700 as the US Federal Reserve’s rate cut intentions become clearer.
The central bank expects the US Federal Reserve to begin cutting its policy rate by 25 basis points at the end of the year, then by a total of 50 basis points in the first half of 2025, Warjiyo added.
In April, Bank Indonesia (BI) made a surprise interest rate hike to support the rupiah, but kept rates steady last month as inflation was under control and the rupiah had stabilized.
The board of governors will meet on June 19 and 20 to discuss rate policy.
The central bank will maintain close coordination with the government to control inflation, Warjiyo added.
Fiscal and monetary policies must be synchronized to respond to market volatility, Finance Minister Sri Mulyani said at the meeting.
“The central bank governor and I see that we need to continue to calibrate and synchronize fiscal and monetary policies, as the trade-off challenges are becoming very tight,” Sri Mulyani said.
The measures taken aim to support economic growth and manage financial stability, she added.
The government proposed an economic growth target of 5.1% to 5.5% for 2025. For 2024, the target was 5.2%. (Reporting by Stefanno Sulaiman and Ananda Teresia; Editing by Martin Petty and Clarence Fernandez)
