Indonesian Rupiah remains steady as Bank Indonesia interventions limit USD/IDR upside
- Bank Indonesia’s continuous FX interventions across spot and NDF markets actively restrict upside gains for the USD/IDR pair.
- New York Fed President John Williams signals no rate hikes for 2027.
- Traders await crucial September CPI reports to gauge due later in the day.
USD/IDR holds ground after posting modest losses the previous day, trading around 17,930 during European hours on Wednesday. The upside for the pair remains limited as the Indonesian Rupiah (IDR) may gain support from Bank Indonesia's (BI) ongoing interventions across the spot, domestic non-deliverable forward (DNDF), and offshore NDF markets.
Moreover, the US Dollar (USD) struggles following dovish remarks from New York Federal Reserve President John Williams. Speaking on Tuesday, Williams noted that while he maintains his view that one more rate hike may be appropriate this year, he does not foresee additional rate increases in 2027. In response, the CME FedWatch Tool suggests markets are currently pricing in roughly a 77% probability that the Fed will leave interest rates unchanged this month, alongside an 88% chance of a rate hike in December.
Market focus now shifts to the US September CPI inflation data scheduled for release later in the North American session, which could offer clearer direction on the Federal Reserve’s monetary policy path. Headline U.S. CPI is expected to show a year-over-year rise of 3.6% in September, up from 3.4% in August. Meanwhile, Core CPI—which excludes volatile items—is projected to tick up to 2.5% year-over-year from 2.4% in the previous month.
Fed’s Collins keeps a hawkish tilt as inflation risks stay in focus
Fed’s Collins’ speech scores 7.1/10 on the FXS Speechtracker, modestly above the 6.7/10 historical average, signaling a slightly stronger hawkish tone relative to the historical average. Emphasis on an “elevated risk of high inflation,” expectations for inflation to remain above 2% amid high energy prices, and support for the September rate hike underscore a data-dependent but clearly inflation-focused stance, even as the job market is described as broadly balanced and resilient. References to ongoing growth, job market stability, and data-center build-out pressures on inflation reinforce a narrative of an economy robust enough to withstand tighter policy, which is typically supportive of the Dollar.
The FXS Fed Sentiment Index fell by 2.23 points to 131.63, indicating a modest pullback in perceived hawkishness despite remaining firmly above the neutral 100 threshold. This configuration suggests that while the overall Fed tone stays in hawkish territory, the incremental shift in sentiment is slightly less aggressive than prior readings, aligning with Collins’ data-dependent framing rather than signaling a clear pivot toward dovishness.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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