Indonesia's Inflation Is Controlled, Rupiah Has The Potential To Strengthen

Illustration of Rupiah (Photo: Antara)

JAKARTA - The rupiah exchange rate in trading Friday, May 3, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, May 2, 2024, the rupiah spot exchange rate closed higher by 0.46 percent to the level of Rp. 16,185 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.45 percent to a price level of Rp. 16,202 per US dollar.

Director of PT.Laba Forexindo Berjangka Ibrahim Assuaibi conveyed that global sentiment came from the Central Bank of the United States of the Federal Reserve which canceled the expectations of further interest rates raising the dollar and providing a little relief on commodity prices.

"But the Fed still hints that it is not in a hurry to start cutting interest rates," he explained in his official statement, quoted Friday, May 3.

According to Ibrahim The Fed offering mixed signals, waiting for the Fed's nonfarm payroll data to keep interest rates stable on Wednesday, as widely estimated.

But Jerome Powell, in his post-meeting speech, gave a rather diverse signal regarding the direction of rising interest rates

Powell said that the discontinuation of disinflation, especially in inflation moving towards the Fed's target of 2 percent, gave the bank a little confidence to start cutting interest rates early.

But Powell also said that the bank had no plans to raise interest rates further.

From an internal point of view, Indonesia's inflation conditions in April 2024 decreased, when compared to the previous month. The Central Statistics Agency (BPS) noted that inflation in April 2024 was 0.25 percent month on month (MOM), or lower than the inflation conditions in March 2024 which amounted to 0.52 percent of the MoM.

Meanwhile, on an annual basis there is inflation of 3.00 percent or year on year (YoY). Meanwhile, inflation on a calendar year (April 2024 to December 2023) reached 1.19 percent year to date (YtD).

Meanwhile, the largest monthly inflation contributor expenditure group in April 2024 was the transportation group with inflation of 0.9 percent, and the contribution of inflation of 0.12 percent.

Meanwhile, the main contributors to inflation from transportation groups are air transportation rates with an inflationary contribution of 0.06 percent, inter-city transportation rates with an inflationary contribution of 0.03 percent, and rail fares with an inflationary contribution of 0.01 percent.

Then, other commodities that also contributed to inflation in April 2024 were shallots with an inflationary share of 0.14 percent, gold jewelery with an inflationary contribution of 0.08 percent, tomatoes with an inflationary contribution of 0.04 percent, and garlic with an inflationary contribution of 0.02 percent.

In addition, there are commodities that contribute deflation. Among others, red chilies with a deflation of 0.14 percent, rice with a deflation of 0.12 percent, and broiler eggs with a deflation of 0.06 percent.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Friday, May 3, 2024, in the price range of IDR 16,140 - IDR 16,210 per US dollar.