Bank Indonesia Seen Raising Rates 25 Basis Points as Rupiah Slides Past 16,450

2 articles · Updated · vtmarkets.com · May 16

ING expects Bank Indonesia to lift its policy rate by 25 basis points at this week’s meeting, with currency support rather than growth management driving the move.
The rupiah has fallen more than 1.5% since BI’s last meeting and weakened beyond 16,450 per dollar despite foreign-exchange intervention, increasing pressure for a tighter stance.
U.S. rates staying at 4.75%-5.00% and fading expectations for Federal Reserve cuts have widened the gap with Indonesia, a backdrop ING says has hurt inflows and weighed on the rupiah.
More than $1.2 billion in net foreign bond outflows last quarter and an 8% rise in implied volatility over the past month show markets are already positioning for further IDR weakness and higher short-term rates.
ING said the setup resembles mid-2025, when a surprise BI rate hike briefly stabilized the currency, reinforcing expectations that the central bank will act again when rupiah pressure intensifies.

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