Jakarta. Bank Indonesia (BI) projects that the rupiah will trade between Rp 15,300 and Rp 15,700 against the US dollar in 2025, influenced by global economic trends and US Federal Reserve policies. This forecast contrasts with the government's Rp 16,100 per dollar assumption in the 2025 Draft State Budget (RAPBN).

BI Governor Perry Warjiyo expects the Fed to lower its benchmark interest rate by 50 basis points in 2024 and 75 basis points in 2025, potentially boosting foreign capital inflows into emerging markets, including Indonesia.

Perry highlighted that Indonesia’s economic fundamentals are strong, with GDP growth around 5 percent and inflation within the target range of 2.5 percent. This stability is likely to attract investors.

The yield on Indonesian government bonds (SBN) remains attractive, especially if the US Treasury's 10-year yield is about 3.6% next year. BI is working with the Finance Ministry on SBN issuance and Indonesian rupiah securities (SRBI).

BI is dedicated to stabilizing the exchange rate and managing volatility influenced by geopolitical factors. Perry noted concerns about a widening current account deficit, which is expected to range between 0.5% and 1.3% of GDP.

Finance Minister Sri Mulyani Indrawati explained that the RAPBN 2025’s Rp 16,100 per dollar assumption reflects global economic uncertainties. Despite recent pressures from a stronger US dollar, the rupiah has recently strengthened, showing its sensitivity to global economic conditions.

Sri Mulyani stressed that Indonesia's economic fundamentals, particularly the balance of payments and export performance, support the rupiah's stability. She also pointed out that the large issuance of US Treasury securities could affect emerging market bonds, including Indonesia's, but the country's strong reputation helps maintain a tight spread.

She warned of high uncertainty and the potential effects of the Fed’s anticipated rate cuts on emerging market securities.