Trump-Powell Conflict Deemed to Trigger Global Volatility, BI Could Hold Interest Rates

JAKARTA, KOMPAS.com - The threat from United States President Donald Trump against Federal Reserve Chair Jerome Powell is considered to have the potential to shake up global financial markets.

Permata Bank’s Chief Economist Josua Pardede views this issue as more than just a matter of job replacement.

“The most important aspect of this issue is not merely whether Donald Trump can truly remove Jerome Powell, but the fact that markets are beginning to see the independence of the US central bank entering the realm of political dispute,” he told Kompas.com on Thursday (16/4/2026).

Movements in exchange rates, bond yields, capital flows, funding costs, and business confidence are the main channels.

Impacts on the real sector, such as consumption and investment, will emerge if the turmoil persists longer.

“That will force BI to remain tight for longer, holding back declines in credit costs, increasing pressure on energy imports, and ultimately suppressing consumption and investment,” he said.

Indonesia is assessed to still have sufficiently strong external buffers.

Foreign exchange reserves as of the end of March 2026 reached $148.3 billion. This figure is equivalent to 5.8 months of imports and government external debt payments.

“The Trump-Powell issue will not shake Indonesia’s economy on its own, but amid the Middle East war, still-high oil prices, rating vulnerabilities, and a sensitive global market, this issue could serve as an additional trigger that exacerbates existing pressures,” he stated.

This situation is putting pressure on the currencies of emerging markets, including the rupiah. However, the direction of the US dollar does not always align.

“This is why the direction of the US dollar does not always follow one path. There are short-term signals that tend to be negative for the US dollar since 8 April, and Trump’s threat to Powell as a factor pressuring the US dollar,” he explained.

Even if the US dollar potentially weakens, the rupiah is not necessarily going to strengthen.

The rupiah exchange rate has remained in the range of Rp 17,100 to Rp 17,150 in recent days.

“So for Indonesia, the most tangible effect of this issue is an increase in rupiah volatility, not just the direction of strengthening or weakening,” he clarified.