Market Waits For Fed Policy Direction Data, Rupiah Potentially Strengthens To Rp16,390 Per US Dollar

JAKARTA - The rupiah exchange rate in trading Wednesday, May 7 is expected to move higher against the United States (US) dollar.

To note, citing Bloomberg, on Tuesday, May 6, the rupiah spot exchange was closed up 0.04 percent to the level of Rp. 16,449 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.31 percent to a price level of Rp. 16,472 per US dollar.

Currency observer Ibrahim Assuaibi said the central bank is expected to maintain a fixed interest rate on Wednesday as policymakers have indicated a waiting approach and see amid tariff concerns.

"The focus will be on comments from Fed Chair Jerome Powell for insight into the Fed's interest rate path in the future," he said in his statement, quoted Wednesday, May 7.

In addition, Ibrahim said investors are now waiting for trade balance data and inflation of the country's consumer price index, which is scheduled for release on Friday.

Previously, private purchase manager index data released on Tuesday showed China's service sector growing slower than expected in April.

According to him, this follows weak manufacturing PMIs from last week, as well as data on gross domestic products that show unexpected contractions in the US economy.

Meanwhile, from within the country, Ibrahim said that the market was optimistic that government consumption or spending would continue to be accelerated and mitigating the impact of uncertainty would continue, after the economy grew 4.87 percent on an annual basis in the first quarter of 2025.

"The government continues to expand the scope of implementation of higher-value priority programs such as Free Nutrition Food (MBG)," he said.

As is known, the MBG program has been added to IDR 171 trillion. Meanwhile, the realization began to accelerate since March and reached IDR 2.3 trillion as of April. Previously in the first two months of this year, the realization only reached IDR 300 billion.

In addition, the government also provides support for the housing sector through tax incentives, including the expansion of the housing target through the Housing Financing Liquidity Facility (FLPP) to be higher than the previous 220,000.

Meanwhile, government spending was indeed restrained due to the efficiency and reallocation of the budget carried out at the beginning of the year. As a result, K/L spending was suspended from January to Sri Mulyani unblocked her budget in March 2025.

In the first quarter of 2025, all components of gross domestic product (GDP) growth grew positively except for government consumption, which contracted 1.38 percent on an annual basis or year on year (YoY).

Ibrahim said that in dealing with global uncertainty that has an impact on the domestic economy, periodic monitoring and efforts to mitigate the impact of uncertainty need to be carried out.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading on Wednesday, May 7, 2025, in the price range of IDR 16,390 - IDR 16,450 per US dollar.