Indonesian Rupiah Exchange Rate Under Pressure: Central Bank Maintains Policy Rate, Shifts Focus to Forex Market Stability

Currently, the Indonesian rupiah is facing downward pressure, prompting market attention on potential central bank policy adjustments. According to Jinjitu data, analysts at Bank of New York Mellon expect the Indonesian central bank to keep the policy rate unchanged at 4.75% in the upcoming policy meeting and adopt a more cautious stance. This shift indicates that the central bank’s focus has moved from solely promoting economic growth to stabilizing the rupiah exchange rate.

Central Bank’s Policy Focus Shifts to Exchange Rate Defense

The Indonesian central bank’s policy stance is quietly changing. Once primarily aimed at boosting economic growth, the central bank is now dedicating more effort to exchange rate stability. Analysts point out that this shift is evident, as the pressure on the rupiah’s exchange rate has become a reality the central bank must face. To maintain exchange rate stability, the bank may conduct large-scale foreign exchange market interventions to actively curb currency depreciation.

Keeping the policy rate unchanged sends a clear signal: the central bank is not planning to further loosen monetary policy for now. Behind this choice is a deep understanding of exchange rate pressures. Rather than lowering interest rates to stimulate the economy—which could further weaken the currency—it is better to keep policies relatively stable to create room for exchange rate stability.

Multiple Factors Support the Rupiah Exchange Rate

The factors supporting the rupiah are not singular but multifaceted. Elevated local borrowing rates provide some attractiveness to the currency—high interest rates often attract foreign investment, supporting the rupiah. Additionally, administrative production cuts in the nickel industry have also played a stabilizing role. As a major nickel exporter, production cuts can boost nickel prices and increase export revenue, directly supporting the rupiah.

These factors together form a protective net, preventing the rupiah from spiraling out of control despite pressure. Analysts believe that while these supports are effective, the central bank still needs to intervene moderately to further strengthen the currency.

Foreign Exchange Interventions as a Key Tool for Exchange Rate Stability

In the face of complex exchange rate conditions, the Indonesian central bank is actively exploring new policy tools. By closely monitoring domestic asset volatility, the bank has established a more sensitive risk warning mechanism. When domestic asset prices experience abnormal fluctuations, the central bank will swiftly initiate foreign exchange interventions to prevent further volatility.

It is important to note that policy effects are not immediate. These defensive measures often take time to fully manifest. In the early stages, markets may not see obvious results, but over time, these measures will gradually reinforce the rupiah’s stability. Investors are advised to remain patient and trust in the central bank’s policy resolve.

Currently, whether the rupiah remains stable has become a key factor influencing Indonesia’s macroeconomic outlook. Through maintaining the policy rate and strengthening exchange market management, the central bank is working to establish a more resilient monetary environment. This balanced policy approach reflects the central bank’s cautious weighing of economic growth against exchange rate stability.