Controlled Inflation, Rupiah Early Week Potentially Strengthens

JAKARTA - The rupiah exchange rate in trading Monday, May 6 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Friday, May 3, 2024, the rupiah spot exchange closed higher by 0.63 percent to the level of Rp. 16,083 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.67 percent to a price level of Rp. 16,094 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said the weakening of the US dollar provides breathing space for regional currencies, although the currency is still experiencing a major decline as the prospect of US interest rates remains high for a longer period of time.

According to Ibrahim, signs of persistent power in the labor market will give the Fed more space to keep interest rates high longer.

"The central bank recently warned that this is likely to continue in the short term, with high inflation also giving the Fed little reason to lower interest rates. But the Fed also hinted that it had no intention of raising interest rates further," he explained in his official statement, quoted Monday, May 6.

From an internal point of view, Bank Indonesia reported that the Inflation of the Consumer Price Index (IHK) in April 2024 was maintained in the target range of 2.5 percent plus minus 1 once. The April 2024 IHK inflation was recorded at 0.25 percent (mtm), bringing it to 3 percent (yoy) on an annual basis.

This is due to the slick cooperation between the government and BI which has maintained inflation through consistent monetary policy and close synergy. This consistency is supported by the National Movement for Food Inflation Control in various regions.

Core inflation is also under control, although it has increased slightly. The data shows that core inflation in April 2024 reached 0.29 percent (mtm), with the main contribution of gold jewelery, cooking oil and sugar commodities.

However, volatile food groups experienced deflation of 0.31 percent (mtm) in the same month, mainly due to the decline in the price of red chilies, rice, and broiler eggs.

Meanwhile, the administrative price group experienced an increase in inflation, mainly influenced by rising air and intercity transportation rates, as well as engine kretek cigarettes.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Monday, May 6, 2024, in the price range of IDR 16,030 - IDR 16,120 per US dollar.