US Inflation Remains Strong, Rupiah Projected To Continue Weakening

JAKARTA - The rupiah exchange rate in trading Friday, November 15, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, November 14, 2024, the rupiah exchange rate on the spot market closed down 0.49 percent at the level of Rp15,862 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate closed lower by 0.58 percent to a price level of Rp15,873 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi conveyed signs of strong US inflation triggering uncertainty over future cut in interest rates, while investors await more stimulus measures in China.

"The US consumer price index inflation data is read in accordance with expectations for October, but it still shows that inflation remains strong," he said in his statement, quoted Friday, November 15.

Ibrahim said the reading was still spurring bets on the December cut in interest rates by the Federal Reserve, prospects for long-term interest rates are becoming more uncertain, especially in the face of policies potentially inflation under Trump.

In addition, the market is now waiting for Fed Chair Jerome Powell's speech for further signaling about monetary policy. The Fed cut interest rates by 25 basis points last week, and reaffirmed its data-driven approach to easing in the future.

Meanwhile, from within the country, economists assess President Prabowo Subianto's plan to change the oil fuel subsidy policy to direct cash assistance (BLT) is more targeted and already good. There are a number of indicators that make the policy suitable for implementation from now on.

In terms of the world crude oil price factor, it is currently experiencing weakening under the assumption of the state budget. In addition to the sloping inflationary pressure, world crude oil is oversupply due to the decline in crude oil imports from China due to its weakening economy.

Under the assumption of the 2024 State Budget, the price of Indonesian or ICP crude oil at the level is 82 per barrel of US dollars, while the movement of world crude prices to date is only around 74 per barrel of US dollars. Meanwhile, in terms of general inflation as of October 2024, only 1.71 percent on an annual basis.

The slope of inflation in the last few days has triggered deflation due to a decrease in purchasing power. Therefore, it is necessary to have looser criteria for people who receive new policies for fuel subsidies, not only the poor, but also vulnerable and lower middle class groups.

In addition, the government is not only focused on improving the fuel subsidy policy, but also LPG and electricity subsidies because for LPG alone the value of subsidies and compensation is large.

Meanwhile, for fuel, although next year the subsidy will be IDR 26 trillion, apart from subsidies, there will be considerable compensation. In 2023, for example, the compensation for BBM realized reached Rp. 133 trillion and 2022 reached Rp. 307 trillion.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading Friday, November 15, 2024, in the price range of IDR 15,850 - IDR 15,950 per US dollar.