Dutch International Group: Bank of Indonesia keeps interest rates unchanged, while continuing to prioritize the Indonesian Rupiah.

Economists from the Netherlands International Group have stated that due to fuel subsidies suppressing inflation, the Indonesian central bank may maintain its policy unchanged. The Indonesian central bank earlier kept interest rates unchanged in order to limit the risk of the Indonesian rupiah. Deepali Bhargava of the Netherlands International Group said that with the reduced necessity of taking contractionary measures, the Indonesian central bank may rely on non-interest rate tools to stabilize the Indonesian rupiah. She pointed out that the consumer price index may reach around 3.5% in the coming months, but this is significantly lower than the peak during the aggressive contractionary policies in 2022. Additionally, raising interest rates may not be advisable in the current situation of slowing growth. The Netherlands International Group expects interest rates to remain unchanged until the end of the third quarter, and slowing growth may open the door to rate cuts. However, if oil prices exceed $100 per barrel, it may increase fiscal risks. This could put pressure on the Indonesian rupiah, along with factors such as low oil reserves and limited foreign exchange reserves, which could limit intervention possibilities.