Indonesian Rupiah: BI seen hiking to anchor rupiah – UOB

UOB strategists highlight Bank Indonesia’s (BI) policy meeting, with consensus expecting no change but its macro team forecasting a 25 bps hike to 6.00%. They see risks around the Indian Rupee (IDR), divided views on Federal Reserve (Fed) policy and rising global inflation. They project three hikes in total, taking the BI rate to 6.50% by end-2026, as USD/IDR has recently pushed higher.

BI tightening to support currency

"Focus turns to Bank Indonesia (BI) today where it will make its latest monetary policy decision this afternoon at about 3:20pm SGT."

"Market consensus expects BI to keep its policy BI rate unchanged at 5.75% but our macroeconomic team is expecting a further 25-bps hike instead to 6.00%, With risks to the rupiah’s trajectory, divided market expectations of US Fed’s policy direction, and upside risks to global inflation forecasts amid rising energy prices, our macroeconomic team believes BI is likely to remain focused on anchoring currency stability and inflation expectations."

"As such, we expect two 25-bps hikes in 3Q26 and a final 25-bps in the 4Q26, bringing the policy rate to a terminal level of 6.50% by end 2026."

"In South East Asia, USD/IDR recovered from 17,820 to 17,850 as USD/MYR pushed back up from 4.05 to 4.0595."