Jakarta. The Indonesian rupiah opened stronger against the US dollar in Wednesday's trading as markets anticipate the outcome of the Bank Indonesia (BI) Board of Governors meeting and the US Federal Open Market Committee (FOMC) later today.

In early trading, the rupiah appreciated by 5 points or 0.03 percent to Rp 15,330 per US dollar, up from the previous Rp 15,335 per US dollar.

"Investors are in a wait-and-see mode, awaiting the BI Board of Governors meeting this afternoon and the FOMC meeting tonight," said currency analyst Lukman Leong in Jakarta on Wednesday.

Economists expect BI to maintain its benchmark interest rate during the meeting scheduled for Sept. 17-18, 2024. This is due to the steady performance of the rupiah and stable inflation conditions.

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“We anticipate that BI will keep the benchmark interest rate at 6.25 percent, considering the high volatility of the rupiah, despite the significant appreciation of the rupiah from July to September 2024,” said Bank Danamon economist Hosianna Evalita Situmorang on Tuesday.

She added that BI needs to maintain attractive yields, as foreign capital inflows have surged since August 2024, driven by expectations of a rate cut from the US Federal Reserve.

“We expect a BI rate cut by the end of 2024, possibly in November or December, considering the domestic transition of leadership and regional elections,” Hosianna said.

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She also forecasted that the US Federal Reserve will cut its benchmark rate by 50 basis points by the end of 2024, followed by further reductions of 100 basis points in 2025 and 2026.

“With the US Fed rate expected to be around 3 percent, we expect BI to maintain the rate at 5.5 percent by the second half of 2025. This attractive rate spread could help stabilize the rupiah, along with hopes for an acceleration in both domestic and global economic activity,” she explained.

Meanwhile, Bank Permata's Chief Economist Josua Pardede stated that BI has room to cut its benchmark rate by the end of 2024, driven by anticipated capital inflows in the third quarter of 2024 and lower risks of twin deficits. He cited a gradually normalizing commodity price environment and the potential impact of weaker global demand.

“Strong domestic demand, as reflected in robust import performance, may contribute to a widening current account deficit. However, potential global rate cuts this year could help stabilize commodity prices, supporting export performance to some extent,” Josua said.

Previously, BI decided to maintain its benchmark interest rate at 6.25 percent, the deposit facility rate at 5.5 percent, and the lending facility rate at 7 percent during the Board of Governors meeting held on August 20-21, 2024.

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