Akmalal Hamdhi, Jakarta – Rupiah fell to one of its weakest levels this year on Thursday, pressured by persistent global uncertainty after the Federal Reserve held interest rates, reinforcing concerns over inflation and external risks.

The rupiah closed down 20 points, or about 0.12%, at Rp 17,346 per dollar, reflecting sustained external pressure, particularly from US monetary policy.

Fakhrul Fulvian, Chief Economist at Trimegah Sekuritas Indonesia, said the Fed's cautious but not fully aggressive stance signals that inflationary pressure and global risks remain unresolved.

"The cautious stance, while not fully aggressive, signals that inflation pressures and global risks are still lingering," Fakhrul said on Thursday.

He added that the rupiah is currently in an overshooting phase, where the exchange rate moves beyond short-term fundamentals and is still searching for a new equilibrium.

In such conditions, markets need a strong signal from monetary authorities that stability will be maintained.

Fakhrul urged Bank Indonesia to adopt a more decisive or hawkish policy stance through a tightening bias, emphasizing that this does not necessarily mean an immediate rate hike but a clear signal of readiness to act if pressures intensify.

"A hawkish response from Bank Indonesia is crucial, not only to contain exchange rate pressures but also to manage market expectations. This is not about chasing the Fed, but about maintaining confidence in domestic stability," he said.

On the fiscal side, Fakhrul highlighted the importance of clarity in the state budget, including adjustments to priority programs such as the free nutritious meals initiative.

"Budget adjustments, including in the free meals program, show that the government is responsive to fiscal dynamics and not trapped in rigidity. This is important to maintain the credibility of the state budget amid rising global pressures," he said.

He added that markets are seeking clearer fiscal targets and financing strategies, particularly as energy prices and domestic spending needs pose potential risks.

According to Fakhrul, strong coordination between Bank Indonesia and the Finance Ministry remains key to maintaining macroeconomic stability.

"Markets and the public need not only the right policies, but also certainty that those policies will be executed with discipline and flexibility. Policymakers' prudence is key to preserving stability and confidence," he concluded.

Source: https://jakartaglobe.id/business/rupiah-sinks-to-alltime-low-economist-warns-of-overshootin