Jakarta, CNBC Indonesia – The rupiah exchange rate weakened again against the United States (US) dollar on Friday (23/9/2022), a day after Bank Indonesia (BI) surprised by raising interest rates by 50 basis points.
According to Refinitiv data, the rupiah at 14:00 WIB touched Rp. 15,035/US$, weakening 0.13% in the spot market. Garuda currency is near its weakest level in more than 2 years.
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Yesterday’s increase in interest rates was higher than the consensus compiled by CNBC Indonesia, the majority of which predicted an increase of 25 basis points. So it’s a surprise again.
“The meeting of the Board of Governors of Bank Indonesia on September 21-22 2022 decided to increase the BI 7 Day Reverse Repo Rate by 50 bps to 4.25%, the Deposit Facility interest rate to 3.5%, and the Lending Facility interest rate to 5%,” said BI Governor Perry Warjiyo in a press conference, Thursday (22/9/2022).
BI Governor Perry Warjiyo said the interest rate hike was part of the move pre-emptive, front-loading and forward looking to suppress inflation expectations. Expectations are expected to soar after the increase in the price of subsidized fuel oil on 2 September.
However, the rupiah has not been able to strengthen in response to the shock from BI. Because, Perry emphasized that the interest rate hike would not be aggressive.
“Aggressive interest rate hikes are not needed in Indonesia,” said Perry.
On the other hand, the US central bank (The Fed) has emphasized that it will continue to be aggressive in raising interest rates.
The Fed on Thursday morning when Indonesia again raised interest rates by 75 basis points to 3% – 3.25%. So far this year, the Fed has raised its benchmark interest rate by 300 basis points, and will continue to do so until next year.
The Fed now sees interest rates set to hit 4.6% (4.5% – 4.75% range) next year. This means that there will still be an increase of 150 basis points from the current level.
In fact, some Fed officials see interest rates in the 4.75 – 5% range in 2023.
This makes the US dollar very strong, it is difficult for the rupiah to strengthen.
CNBC INDONESIA RESEARCH TEAM
Wait for a surprise from BI, Rupiah weakens again