USD/IDR: Rupiah bounces from two-year lows on Bank Indonesia’s expected 50 bps hike

At its October monetary policy meeting on Thursday, Indonesia’s central bank, Bank Indonesia (BI), hiked its 7-day reverse repo rate by 50 bps from 4.25% to 4.75%, as widely expected.

The central bank Governor Warjiyo said in the policy statement that “Indonesia to monitor forex supply, strengthen policy to stabilize rupiah.”

Additional Comments

2022 Current Account surplus estimate at 0.4-1.2% of GDP.

Depreciation of rupiah relatively better than other peer currencies.

Rupiah depreciation is in line with dollar strength, rising uncertainty and aggressive monetary tightening by some countries.

Impact of fuel price hikes on food prices not as big as pvsly anticipated.

Core inflation remains low, under control.

Oct headline inflation is seen below September's inflation rate based on survey.

2022 inflation is still seen above target range.

Will intervene in FX markets to prevent imported inflation.