The Fed Rate Hike: DPR Urges Bank Indonesia to Exercise Caution and Protect Rupiah
Amin Ak, a member of Commission XI of the Indonesian House of Representatives (DPR RI), has issued serious notes regarding the decision by the US central bank, the Federal Reserve, to raise the federal funds rate to a range of 3.75% to 4.0% on Wednesday (16/9) local time. This increase is the first since July 2023 and is predicted not to be the last this year.
Amin revealed that the impact of this policy is already being felt in the stability of the Rupiah exchange rate. According to him, the narrowing interest rate differential between the US and Indonesia is triggering capital outflows towards US dollar assets that offer more attractive yields.
“The impact is already visible: the Bank Indonesia official rate (JISDOR) recorded the Rupiah at Rp17,712 per US dollar on 16 September, and throughout Thursday, the Rupiah was pressured to around Rp17,745 per US dollar,” Amin told Media Indonesia on Thursday (17/9).
In addition to the exchange rate, the domestic capital market has also been affected. The Indonesia Composite Index (IHSG) recorded a decline of 0.38%, with net foreign selling reaching Rp430.21 billion on 17 September. As of now, the Rupiah remains held around the Rp17,700 per US dollar level.
In response to these conditions, Amin requested that Bank Indonesia (BI) does not rush into taking reactive measures by directly raising the BI Rate, which currently stands at 5.75%. He emphasised that BI’s decision at the Board of Governors Meeting on 22-23 September must be based on a mature calculation of domestic conditions.
“BI should not simply follow suit. I hope Bank Indonesia responds with caution, rather than automatically raising interest rates just because the Fed has raised theirs. The decision must consider the movement of the Rupiah, government bond yields, and domestic inflation expectations,” stated the legislator from the PKS Faction.
He suggested that BI has two strategic options: maintaining interest rates by strengthening market intervention, or taking pre-emptive steps if the pressure on the Rupiah is deemed too heavy.
On the other hand, Amin assessed that Indonesia still possesses a sufficiently strong foundation. As of the end of August 2026, Indonesia’s foreign exchange reserves were recorded at US$146.5 billion. This amount is equivalent to 5.4 months of import financing, well above international adequacy standards.
“This is a strong buffer, but we must not become complacent,” he warned, urging that the trend in foreign exchange reserves remains maintained.
Furthermore, Amin highlighted that current economic challenges are not solely a burden for monetary policy. Rising energy prices due to conflicts in the Middle East demand an active role from the government in managing the State Budget (APBN), particularly regarding energy subsidies.
“The government needs to calculate the impact on energy subsidies and the state budget, rather than leaving everything to monetary policy,” he added.
In closing, Amin emphasised that the key to facing external pressures is maintaining market confidence through fiscal discipline and consistent policy communication. As long as inflation remains controlled and the attractiveness of government debt securities is maintained, Indonesia is believed to have sufficient room to avoid a crisis.