Rupiah strengthens as expectations of Fed rate hike diminish

The rupiah exchange rate at the close of trading on Wednesday afternoon strengthened by 23 points, or 0.13 percent, to Rp18,068 per US dollar from the previous Rp18,091 per US dollar. Doo Financial Futures analyst Lukman Leong said the rupiah’s strengthening was influenced by diminishing expectations that the Fed would raise interest rates. “The rupiah closed stronger against the US dollar, supported by US inflation data that was weaker than expected, triggering reduced expectations for the Fed to raise interest rates,” he said in Jakarta on Wednesday. Citing Anadolu, annual US consumer inflation slowed to 3.5 percent in June 2026, below market expectations, as a sharp drop in energy prices drove the largest monthly decline since April 2020. The annual inflation rate slowed from 4.2 percent in May 2026. Following the release of the inflation data, new projections showed nine Fed officials anticipate at least one quarter-point rate hike this year, while nine others expect no change or a rate cut. The rupiah’s strengthening was also supported by S&P Global Ratings’ decision to maintain Indonesia’s rating at BBB with a stable outlook. “The strengthening is limited by heating geopolitics in the Middle East and rising world oil prices,” he said. Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also moved stronger today to Rp18,064 per US dollar from the previous Rp18,099 per US dollar.