The Rupiah Is Predicted To Be Overshadowed By The Cut Of US Interest Rates

Rupiah and US Dollars (Photo: Antara)

JAKARTA - The rupiah exchange rate in trading Thursday, December 19, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Wednesday, December 18, 2024, the rupiah spot exchange rate closed slightly higher by 0.02 percent to the level of Rp. 16,097 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. 16,100 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said that the Fed is widely expected to cut interest rates by 25 basis points, but its focus will be on future economic projections of the Fed and comments from Chairman Jerome Powell.

"The signal about the prospect of the Fed's long-term interest rate remains the focus as inflation remains stubborn and is expected to continue to increase under President Donald Trump," he said in his statement, quoted by Kams, December 19.

In addition, Ibrahim said the Bank of Japan and the Bank of England were also scheduled to make a interest rate decision this week. The BOE is expected to keep interest rates stable, while the market is divided into whether BOJ will raise interest rates further.

Meanwhile, from within the country, the Market responded negatively to the increase in Value Added Tax (VAT) rates to 12 percent starting January 1, 2025. This policy is considered not to have brought significant changes. The increase in VAT rates will have a major impact on the community's economy, especially low-income groups.

Even though the government expresses partiality to the lower classes of people, in fact VAT continues to rise for most of their needs. Not only that, I also criticized the comparisons made by the government regarding Indonesia's VAT rates with countries such as Canada, China, and Brazil. This comparison is irrelevant because these countries have high per capita income and a stable economy.

In addition, Bank Indonesia (BI) has again detained the benchmark interest rate or BI rate at the level of 6 percent amid the weakening of the rupiah exchange rate against the United States (US) dollar. The Deposit Facility interest rate is 5.25 percent, and the Lending Facility interest rate is 6.75 percent.

This decision is consistent with the direction of monetary policy to ensure that inflation remains under control in the 2.5 percent plus-minus 1 percent target by 2024 and 2025, as well as to support sustainable economic growth.

The monetary policy is directed to strengthen the stability of the rupiah exchange rate from the impact of the increasing uncertainty in the global economy due to the policy direction of the United States and the escalation of geopolitical tensions in various regions.

In the future, BI will continue to pay attention to the movement of the rupiah exchange rate and the prospects for inflation, as well as the dynamics of developing conditions, in observing the space for further lowering monetary interest rates.

Ibrahim estimates that the rupiah will fluctuate but close lower on trading Thursday, December 19, 2024, in the price range of IDR 16,080 - IDR 16,140 per US dollar.