The Fed's Policy And Geopolitical Tensions Predicted To Suppress Rupiah

Rupiah (photo: dock. Antara)

JAKARTA - The rupiah exchange rate in trading Friday, June 20 is expected to move lower against the United States (US) dollar.

To note, citing Bloomberg, on Thursday, June 19, the rupiah spot exchange closed down 0.57 percent to the level of IDR 16,406 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.36 percent to a price level of IDR 16,378 per US Currency Observer Ibrahim Assuaibi said the Federal Reserve maintains its policy interest rate at 4.25 percent 4.50 percent, and maintains expectations for double the interest rate cut by a quarter point later this year.

"Chairman Jerome Powell stressed that inflation in goods prices is likely to increase this summer as tariffs recently imposed by President Trump began to cross the supply chain to consumers," he said in a statement, quoted Friday, June 20.

In addition, the Fed projects a slower easing rate in the future, estimating interest rates will drop to 3.6 percent by 2026, up from the previous estimate of 3.4 percent.

Meanwhile, for 2027, the Fed sees interest rates at 3.4 percent, revised up from 3.1 percent.

In addition, Ibrahim explained senior US officials were preparing for a potential attack on Iran in the coming days.

"The preparations indicate that Washington may position itself to be directly involved in the Israeli-Iran conflict. Although plans remain uncertain, some officials designate the weekend as a possible time to act," he explained.

Ibrahim said in a Wall Street Journal report earlier that US President Donald Trump informed his senior aides late Tuesday that he had approved plans to attack Iran but stopped the move to see if Tehran would withdraw from its nuclear ambitions.

Meanwhile, from within the country, Ibrahim conveyed that the disbursement of the 13th ASN salary and several government incentives planned for June 2025 is expected to provide a significant boost to Indonesia's economic growth in the second quarter of 2025, but the war in the middle east between Israel and Iran that continues to occur will be a stumbling block to the Indonesian economy.

Therefore, economic growth in the second quarter of 2025 is estimated to be still below 5 percent on an annual basis or year on year (YoY) and the current economic growth condition is in the range of 4.8 percent.

Ibrahim explained that in order to support economic growth, the incentive packages that will be launched are expected to encourage household consumption growth, which is the main contributor to economic growth, which is around 55 percent.

According to him, if this incentive goes well, household consumption growth can jump from 4.8 percent to a higher number, even though the duration and amount of incentives affect the impact.

"If the incentives only run for two months, the impact will be very limited," he said.

Ibrahim explained that apart from public consumption, overall economic growth was also influenced by other factors, including investment, exports, and imports.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading Friday, June 20, 2025 in the price range of IDR 16,400 - IDR 16,460 per US dollar.