Rupiah Poised to Strengthen Again, Key Conditions Outlined

Fakhrul Fulvian, Head Economist at Trimegah Securities Indonesia, believes the rupiah has significant room to rebound if there is an improved policy mix and balanced fiscal-monetary burden sharing. He estimates that the rrupiah could strengthen to Rp 16,800-17,000 per US dollar if fiscal and monetary coordination is solid. ‘The current rupiah level is too weak compared to Indonesia’s actual economic potential,’ Fakhrul said in a statement on Thursday, 28 May 2026. Fakhrul argues that stabilising the rupiah cannot solely rely on Bank Indonesia (BI), requiring a balanced policy mix between fiscal and monetary measures. Fakhrul notes that markets closely monitor the consistency of government and BI policies, making coordination crucial amid global pressures. ‘If BI tightens policy but fiscal stance and policy communication remain unsynchronised, pressure on the rupiah will persist,’ he said. BI recently raised the benchmark rate (BI Rate) by 50 basis points to 5.25%. Fakhrul said this move is key to restoring credibility and anchoring market expectations. He added that this step is necessary to demonstrate BI’s commitment to 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,’ Fakhrul said. Meanwhile, Indonesia’s fiscal stance must adapt to new global realities. He believes the world is entering an era of higher structural inflation, geopolitical fragmentation, high energy costs, and more complex supply chains. Fakhrul warnings that bond markets are highly sensitive to fiscal perceptions. If investors worry about state budget financing, external stability, and subsidy direction, bond yields will rise due to higher risk premiums. He also noted that domestic interest rate structures are currently not fully healthy. High SRBI rates are effective in maintaining rupiah stability short-term, but if sustained too long, they risk drawing liquidity into monetary instruments, increasing funding costs, and hampering credit to productive sectors.