Indonesian Rupiah holds losses following BI rate decision

• Bank Indonesia decided to keep its benchmark interest rate unchanged at 5.75%.
• US Dollar strengthens as the Fed signals another potential rate hike before year-end.
• The CME FedWatch Tool indicates an 89.2% probability of a December rate increase.

USD/IDR loses ground for the second successive day, trading around 17,850 during European hours on Wednesday. The pair holds losses as the Indonesian Rupiah (IDR) remains subdued following the release of Bank Indonesia (BI) interest rate decision.

Bank Indonesia has opted to keep its benchmark interest rate unchanged at 5.75%. Central bank officials noted that the rate hikes implemented in May and June were pre-emptive, forward-looking measures designed to counter global economic developments. BI emphasized its use of innovative policies to manage ongoing global uncertainty, maintaining that the current rate level is adequate for now. Furthermore, the central bank highlighted its commitment to fostering economic growth and supporting current business momentum.

Global economic growth remains subdued in 2026, with projections holding steady at 3% and global inflation expected to average around 4%. Against this backdrop, monetary policy continues to tighten globally, with the potential for further US rate hikes. In contrast, domestic economic growth remains solid. To navigate this environment, measures to stabilize the Rupiah will be reinforced, alongside the strategic optimization of policy instruments to attract foreign capital inflows.

The downside of the USD/IDR pair could be restrained as the US Dollar (USD) gains ground on the back of a hawkish policy outlook from the Federal Reserve (Fed). Following a recent 25 basis point increase that brought the benchmark interest rate target to the 3.75%–4.00% range, Fed policymakers have signaled that another rate hike remains on the table before the end of the year.

Financial markets are actively pricing in this trajectory, with the CME FedWatch Tool showing nearly an 89.2% probability of a December rate increase. Traders turn their focus toward the preliminary US PMI data scheduled for release later on Wednesday.

Dollar stays supported as Fed rhetoric outweighs softer energy and risk backdrop

Strategists at ING highlight that the Dollar “continues to show very good resilience to lower energy prices and a risk-friendly environment,” arguing that this is “another sign that the Fed story is dominant, and the hawkish Fedspeak is enough to keep USD in demand.” They note that Richmond Fed President Thomas Barkin, who becomes a voter in 2027, reinforced that message yesterday, “arguing that a single rate hike may not be enough to bring inflation under control,” underscoring why the currency remains underpinned despite more benign market conditions.