The Movement Of The Rupiah Is Still Overshadowed By The Increase In Reference Interest Rates

Illustration (Photo: Doc. Antara)

JAKARTA - The movement of the rupiah against the United States (US) dollar will still be influenced by the increase in the benchmark interest rate in trading on Tuesday, October 24 and has the potential to continue to weaken.

For information, based on Bloomberg data, the rupiah weakened 0.38 percent to the level of IDR 15,933 per US dollar on Monday, October 23.

According to the Jakarta Interbank Spot Dollar Rate (JISDOR) benchmark rate of Bank Indonesia, the rupiah exchange rate was at IDR 15,943 lower than IDR 15,856 on the previous trading day.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said the increase in the benchmark interest rate of Bank Indonesia had a significant impact on the economy, especially in the context of consumption and inflation.

"For trading on Tuesday, October 24, the rupiah currency moved fluctuating but closed lower and was stretched by Rp. 15,910-Rp. 15,970 per US dollar," he explained in his official statement, Monday, October 23.

Ibrahim said that the increase in interest rates would affect the public's demand, considering that this makes loans more expensive.

As a result, people's purchasing power is likely to decrease.

According to Ibrahim, after the benchmark interest rate rose, people tended to be more careful.

Especially in taking loans which in turn reduce their spending for various purposes. Meanwhile, the supply side is also affected by the increase in interest rates.

This increase will boost the company's production costs to a higher level, as they have to pay higher interest rates for their loans.

As a result, companies can reduce their profits.

Theoretically, the increase in Bank Indonesia interest rates has a negative impact on consumption.

"People's consumption will experience a decline because prices for goods and services tend to increase due to higher production costs, one of which is because of the high cost of funds," he said.

In addition to the impact on consumption, the increase in BI interest rates can also have a positive impact on inflation.

This happened through a decrease in aggregate demand triggered by an increase in interest rates. The increase in interest rates has the potential to make loans more expensive.

Ibrahim conveyed that this condition certainly also has the potential to reduce community spending as a whole.

So that it can help control inflationary pressures because lower demand can reduce the price of goods and services.

In addition, according to Ibrahim, concerns about transmission from the latest war in the Middle East and doubts the Federal Reserve to raise US interest rates again deliver negative impacts.

"As well as more intensive diplomatic efforts in an effort to contain the conflict between Israel and the Palestinian Islamic group Hamas," he said.