Controlled Rupiah Depreciation Along With Potential Reduction Of Fed Interest Rates

JAKARTA - Head of Permata Bank Economist Josua Pardede said the depreciation of the rupiah exchange rate (exchange rate) remained under control in line with the potential reduction in interest rates by the Federal Reserve (The Fed) with a total of 50 basis points (bps) throughout 2025.

"The weakening of the US (United States) economy is also expected to reduce global commodity prices, thereby reducing pressure on the current account deficit and providing support for rupiah stability," he said as quoted by ANTARA, Wednesday, July 9.

The rupiah exchange rate at the opening of trading today in Jakarta weakened by 43 points or 0.27 percent to Rp16,249 per US dollar from the previous Rp16,206 per US dollar.

According to him, the announcement regarding the reciprocal tariff policy from US President Donald Trump, which postponed the tariff deadline from July 9 or today until August 1, is still relatively moderate.

Until the end of 2025, he projects that the rupiah will move in the range of Rp. 16,100 to Rp. 16,400 per US dollar.

In the short term, negative sentiment due to the tariff is considered to be able to push foreign capital flows out of the domestic financial market, especially on the stock market because of the impact on the negative prospects for economic growth and profits of exporters.

However, according to him, the Indonesian bond market is relatively considered more protected thanks to expectations of cutting interest rates by the Fed.

The yields of 10-year Indonesian government bonds are estimated to be in the range of 6.60'6.80 percent by the end of 2025.

In the long term, he said, a high tariff policy in a sustainable manner could encourage the Government of Indonesia to accelerate the diversification of the export market and strengthen integration with the global value chain continuing.

This is important in order to reduce dependence on the US market and strengthen the resilience of the Indonesian external sector.

"On the other hand, if Indonesia manages to reach a softer trade agreement with the US before the August 1, 2025 deadline, the negative impact it faces will be significantly reduced," said Josua.

On Tuesday 8 July 2025, Coordinating Minister for the Economy Airlangga Hartarto is scheduled to leave for the US to continue the process of negotiating the reciprocal rate with the US.

Airlangga will attend a meeting with representatives of the US Government to discuss the 32 percent tariff decision which will continue as of 1 August.