BI Considers Further Tightening as Rupiah Faces External Pressures

Indonesia's rupiah is facing continued depreciation pressure, prompting Bank Indonesia (BI) to consider additional monetary tightening, according to MUFG Bank.

The analysis from MUFG notes that despite recent rate adjustments, the currency remains vulnerable to external headwinds, including a strong US dollar and global interest rate expectations.

BI's cumulative rate hikes over the past year have struggled to stabilize the rupiah, with MUFG arguing that the current policy stance may not be sufficiently restrictive to anchor the currency.

The assessment suggests that BI's credibility in defending the rupiah will be tested in the coming months, particularly if the Federal Reserve maintains a hawkish posture.