Written by Stefano Soliman
JAKARTA (Reuters) – Indonesia's central bank will continue to intervene in the foreign exchange market to stabilize the rupiah, the governor said on Wednesday, adding that the currency will strengthen next year.
The rupee recovered some of its losses on Wednesday to reach $16,265 by 0603 GMT, after falling as much as 0.46 percent to a four-year low of 16,290.
Governor Perry Warjiyo's statements came at a meeting of Parliament to discuss economic assumptions for next year, which will be used to prepare the 2025 budget.
“Amid the global turmoil, we are continuing our efforts to maintain the rupee exchange rate through intervention in the foreign exchange market as well as when we raised the central bank rate to prevent foreign outflows,” Warjeo said.
Warjio reiterated his expectations that the rupee will trade in a range of $15,700 to $16,100 this year, while he expected it to rise further next year to between 15,300 and 15,700 as the US Federal Reserve's intentions to cut interest rates become clear.
Warjio added that the central bank expects the US Federal Reserve to begin cutting its key interest rate by 25 basis points at the end of the year, followed by a total of 50 basis points in the first half of 2025.
In April, the Bank of Indonesia (BI) introduced a surprise interest rate hike to support the rupiah, but held interest rates steady last month as inflation was brought under control and the rupiah stabilized.
The bank's Board of Governors will then meet to discuss price policy on June 19 and 20.
Warjiyo added that the central bank will continue its close coordination with the government to control inflation.
Finance Minister Sri Mulyani said during the meeting that fiscal and monetary policies must be synchronized to respond to market fluctuations.
Sri Mulyani said: “The Central Bank Governor and I believe that we need to continue calibrating and synchronizing fiscal and monetary policies because the swap policy challenges have become very narrow.”
She added that the measures taken aim to support economic growth and manage financial stability.
The government proposed an economic growth target of 5.1% to 5.5% for 2025. For 2024, the target was 5.2%.