The Rupiah Has The Potential To Strengthen Amid The Fed's Expetation That It Will Not Be Aggressive To Lower Interest Rates

Illustration (Photo: Doc Antara)

JAKARTA - The rupiah exchange rate in trading Friday, September 13, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, September 12, 2024, the rupiah exchange rate on the spot market closed down 0.24 percent at the level of Rp. 15,439 per US dollar.

Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed lower by 0.04 percent to a price level of IDR 15,421 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said that the inflation data for the core consumer price index was read higher than expected for August.

"While the main IHK inflation is still easing, core reading suggests that inflation may prove to be stronger than previously expected, requiring a smaller rate cut from the Fed," he said in a statement, quoted Friday, September 13.

Ibrahim said the bet that the central bank would cut interest rates by only 25 basis points when meeting next week grew substantially after Wednesday's data, while the stakes on the 50 bps cut decreased by more than half.

But before next week's Fed meeting, the focus is on data on the producer price index inflation which will be released on Thursday evening, for further signaling about inflation.

Ibrahim conveyed that the prospect of cutting smaller interest rates is a bad sign for currencies against the US dollar, given that such a scenario signifies tighter US monetary conditions for longer periods of time.

From a domestic perspective, the limitation on the purchase of subsidized Mintak Fuel (BBM) which will be imposed on October 1, 2024, makes people angry again, especially in conjunction with the declining middle class economic conditions, so that it will become a separate burden for the Joko Widodo government.

Ibrahim said that one more month Prabowo-Gibran will soon be appointed as President and vice president.

The Prabowo-Gibran administration period will face tough challenges amid the heated geopolitical situation, especially in the Middle East and Europe, showing no signs of subsidence until the inauguration of Prabowo-Gibran as President and Vice President elected for the 2024-2029 period.

Ibrahim said the Government must have a breakthrough in making economic policies that are careful and measurable and able to respond to every of these global dynamics with smart and effective policies, in order to safeguard national interests.

"The geopolitical trend has an impact on the surge in world oil prices, which exacerbates global inflationary pressures. Central banks of developed countries are also reluctant to lower interest rates, adding to global economic uncertainty that affects developing countries, including Indonesia," he said.

Then, China as one of Indonesia's largest trading partners experienced a decline in economic growth. This affects Indonesia's exports because it can suppress the foreign trade sector, which has been one of the driving forces of the national economy.

This must be done by a new government in order to create a Pancasila and Indonesia 2045 economic system which is one of the main visions and missions when campaigning some time ago.

For the realization of the Pancasila economy and Indonesia Gold 2045, the target is stable economic growth above 6 percent per year, with a focus on developing infrastructure, education, and health.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Friday, September 13, 2024, in the price range of IDR 15,340 - IDR 15,450 per US dollar.