For tomorrows trading, the rupiahs currency fluctuates but closed stronger in the range of Rp16,390 to Rp16,440, said commodities and currency analyst Ibrahim Assuaibi in his routine analysis on Wednesday. He said that several economists predict Bank Indonesia (BI) will keep the benchmark interest rate, or BI rate, at 5 percent. This is because there is pressure on the rupiah due to domestic political turmoil after the mass protests at the end of August 2025 and the cabinet reshuffle, especially the replacement of the finance minister from Sri Mulyani to Purbaya Yudhi Sadewa. Additionally, there is uncertainty in the global market and the impact of Trumps tariff policies.

However, unexpectedly, BI again cut the benchmark interest rate in September 2025; the BI rate dropped by 25 basis points (bps) to 4.75 percent, said Ibrahim.

Meanwhile, the deposit facility interest rate also dropped by 50 bps to 3.75 percent, and the lending facility interest rate by 25 bps to 5.5 percent. Since the beginning of the year, BI has cut the benchmark interest rate four times. The interest rates were cut by 25 bps each in January, May, and July, and August, from 6 percent in December 2024 to 5 percent currently.

The reason for BI to cut the benchmark interest rate and credit interest rates is to help the government disburse the Rp200 trillion funds held at BI to Himbara (State-Owned Banks Association) to be channeled to companies with credit projects, said Ibrahim.

From an external perspective, Ibrahim said the strengthening of the rupiah was influenced by increasing confidence that the U.S. Federal Reserve will cut interest rates. The market projects that the Fed will cut interest rates by at least 25 basis points on Wednesday, given the growing evidence of a slowing labor market.

Ibrahim said some traders also expect a larger cut of 50 basis points. In addition to interest rate cuts, he said, investors will monitor the Feds latest economic projections. After that, the market will consider statements from Fed Chair Jerome Powell at his press conference.

However, the market is still not sure about the signals that the Fed will give regarding future monetary easing, especially considering the latest economic data also shows that U.S. inflation remains stagnant, said Ibrahim.

According to him, Jerome Powell has repeatedly emphasized the need for caution regarding the potential impact of higher U.S. trade tariffs on inflation. As a result, this could delay future interest rate cuts.

Source : tempo.co

Sep 20th, 2025