Jakarta \u2013 Bank Indonesia (BI) stands ready to calibrate its rupiah\nintervention instruments by adjusting its response to three scenarios of\nMiddle East conflict impact, specifically regarding how high global oil\nprices will rise: not too high, moderate, or high.<\/p>\n
BI Governor Perry Warjiyo stated that this effort would be reinforced\nby maintaining foreign exchange reserves and implementing an interest\nrate policy response.<\/p>\n
\u201cWe continue to optimise our three monetary intervention instruments\nwith adequate foreign exchange reserves, reinforced by interest rate\npolicy,\u201d Perry said during an online press conference on the results of\nBI\u2019s Board of Governors Meeting in Jakarta on Tuesday.<\/p>\n
As is known, BI\u2019s exchange rate stabilisation policy operates through\ntriple intervention: intervention in the offshore market through\nNon-Deliverable Forward (NDF), intervention in the domestic market\nthrough spot and Domestic Non-Deliverable Forward (DNDF), and purchases\nof government securities in the secondary market.<\/p>\n
Perry explained that the calibration of these three instruments would\ndepend on the extent of Middle East conflict escalation and its impact\non oil prices, global economic growth and inflation, US dollar\nmovements, portfolio outflows from emerging markets, and US Treasury\nyield levels.<\/p>\n
He confirmed that over the past two days, during BI\u2019s Board of\nGovernors Meeting on Monday and Tuesday, the central bank had calculated\nscenarios to assess the possible duration, intensity, and impact of war\non various economic indicators.<\/p>\n
Perry cited the primary impact as being on global oil prices and\ntheir transmission to global economic growth and inflation, which are\nestimated to depress global economic growth whilst pushing inflation\nhigher.<\/p>\n
Global economic growth in 2026 is projected to slow to 3.1 per cent\nfrom the previous forecast of 3.2 per cent.<\/p>\n
On the inflation side, global inflation pressure also increased from\n3.8 per cent to 4.1 per cent, narrowing the room for global monetary\npolicy cuts.<\/p>\n
Additionally, BI also assessed the war\u2019s impact on global financial\nmarkets. Perry conveyed that foreign portfolio capital flows have exited\nemerging market countries, including Indonesia.<\/p>\n
Furthermore, pressure on the rupiah exchange rate has also increased\nalongside US dollar strength. Meanwhile, the high yield on US Treasury\nbonds affects interest rates and government bond yields in various\ndeveloping countries, including Indonesia.<\/p>\n
In light of these developments, BI made no mention of scope for\nBI-Rate cuts in this Board announcement, as it had in previous\nmeetings.<\/p>\n
\u201cTherefore, because of this Middle East war impact, we no longer\nmention the possibility of interest rate reductions in our statement. We\nremoved this because we indeed may maintain the BI-Rate at its current\nlevel to reinforce intervention and adequacy of foreign exchange\nreserves, and will calibrate this going forward according to future\ndynamics,\u201d Perry said.<\/p>\n
At the March 2026 meeting, BI maintained the BI-Rate at 4.75 per\ncent. The deposit facility and lending facility rates remained at 3.75\nper cent and 5.50 per cent respectively.<\/p>\n
BI stated this decision aims to strengthen rupiah exchange rate\nstability from the deteriorating global conditions due to Middle East\nconflict and to maintain inflation targets for 2026-2027 within the goal\nof 2.5 plus or minus 1 per cent.<\/p>\n
This step marks the continuation of BI-Rate maintenance since October\n2025, following a 150 basis point reduction since September 2024, or 125\nbasis points throughout 2025.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/bi-calibrates-rupiah-intervention-based-on-three-war-impact-scenarios-1773751952", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }