Economist: Rupiah could rebound with solid fiscal and monetary policies

Trimegah Securities Indonesia Chief Economist Fakhrul Fulvian believes the rupiah has significant room to rebound if the policy mix improves and there is balanced burden sharing between fiscal and monetary policies. He estimates that the rupiah could strengthen to Rp 16,800-17,000 per USD if fiscal and monetary coordination is solid. It is worth noting that the offshore rupiah has reached Rp 17,800 per USD during the domestic market holiday for Idul Adha 1447 Hijriyah on Wednesday (27 May 2026) and Thursday (28 May 2026). Fakhr argues that stabilising the rupiah cannot solely rely on Bank Indonesia (BI), hence a balanced policy mix between fiscal and monetary measures is required. He notes that markets are watching the consistency of government and BI policy direction, making coordination crucial amid significant global pressures. ‘If BI tightens policy but fiscal stance and communication remain unsynchronised, pressure on the rupiah will persist,’ he said. According to Fakhr, central bank decisions are vital to restore credibility and maintain market anchor. This is also important to signal BI’s seriousness in stabilising the rupiah and medium-term inflation. ‘BI is returning to a pre-emptive, front-loaded, and ahead of the curve approach like in 2018,’ he said. On the other hand, he argues Indonesia’s fiscal stance must adapt to new global realities. He believes the world is entering an era of higher structural inflation, geopolitical fragmentation, elevated energy costs, and more complex supply chains. He states that domestic interest rate structure is currently not fully healthy. High SBI rates are effective in maintaining rupiah stability in the short term, but prolonged high rates risk drawing liquidity into monetary instruments, increasing funding costs, and hindering credit to productive sectors. ‘Once stability is restored, SBN yield curve must be normalised to gradually attract capital flows,’ Fakhr explained. ‘We need more balanced burden sharing between fiscal, monetary, energy, and real sectors. If the rupiah remains the last resort for all economic pressures, volatility will recur,’ Fakhr said.