Cascading Effects as Rupiah Approaches Rp 17,000, Potential Rise in Lending Rates and Food Prices
Jakarta — The continued weakening of the rupiah, approaching Rp 17,000 per US dollar, is raising concerns about cascading effects on the national economy, ranging from potential increases in bank lending rates to threats of surging basic commodity prices.
The rupiah’s exchange rate in the spot market during trading on Tuesday (10 March 2026) is expected to remain under pressure. At the close of trading on Monday, the rupiah depreciated by 0.14 percent to Rp 16,949 per US dollar.
Currency and commodity analyst Ibrahim Assuaibi estimates the rupiah will continue to weaken in the range of Rp 16,950 to Rp 17,000 per US dollar.
The pressure on the rupiah has sparked speculation that Bank Indonesia may adopt monetary policy measures by raising the benchmark interest rate, or BI-Rate, to curb the depreciation.
Ibrahim believes raising the interest rate is one potential option the central bank may pursue to maintain exchange rate stability.
“To stem the pace of rupiah depreciation, Bank Indonesia must raise the interest rate, because what? If Bank Indonesia were to maintain the interest rate, that too would be futile,” Ibrahim told Kompas.com.
This situation could potentially affect the public’s ability to access financing, particularly for property purchases and consumer credit.
“If lending rates rise, people taking out loans, such as for property purchases, will certainly face greater burden in paying instalments,” he said.
The pressure on the rupiah is linked to growing global uncertainty, partly due to conflict in the Middle East disrupting global energy distribution, particularly after strategic oil trade routes in the Strait of Hormuz were disrupted.
This situation has driven global crude oil prices to surge to around 117 US dollars per barrel, or roughly Rp 1,930,500 per barrel assuming an exchange rate of Rp 16,500 per US dollar.
In the short term, oil prices could potentially rise to the range of 130 to 200 US dollars per barrel, or roughly Rp 2,145,000 to Rp 3,300,000 per barrel, if the conflict continues.
Ibrahim explained that the oil price assumption in the state budget is in the range of 92 US dollars per barrel, or roughly Rp 1,518,000 per barrel. When global oil prices exceed this assumption, pressure on the state budget could increase.
“At the 92-dollar-per-barrel level alone, the budget deficit could reach around 3.6 per cent. Now oil prices are already around 117 US dollars per barrel,” he said.
As a country that still imports part of its energy needs, Indonesia must spend more foreign exchange when global oil prices rise. This situation increases energy import needs and could further depress the rupiah’s exchange rate.
Moreover, rising oil prices also increase the government’s energy subsidy burden. If budget pressure rises, the government may implement policy adjustments such as subsidy reductions or adjustments to domestic energy prices.
Rising energy prices typically trigger cascading effects across various economic sectors. Transportation and goods distribution costs increase, pushing up the prices of various daily necessities.
Several imported commodities such as electronics and industrial raw materials also risk price increases. The agricultural sector can also be affected as commodities such as soybeans, maize, and fertiliser remain influenced by global energy prices and distribution costs.