The Indonesian Rupiah has already fallen by more than 2.6% against the Dollar so far this quarter on the back of high crude Oil prices and a rising Do
The IDR is facing depreciation pressure due to rising crude oil prices and a strong dollar. In the event that the Fed hikes rates again , further narrowing of the rate differential would put additional pressure on the currency. In addition, a worsening current account balance is proving challenging.
Despite well-behaved inflation and growth that’s failing to regain traction, BI is in no position to embark on a policy rate easing cycle. With the Fed clearly indicating higher rates for longer and BI not ruling out an additional hike, the pressure on the currency and bond yields should only intensify in the short to medium term. Hence, we do not foresee a rate cut by BI before 1Q24, with a non-negligible probability of it being shifted further out to 2Q24.
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