Indonesian Rupiah holds losses following BI rate decision

The Indonesian Rupiah has experienced losses for two consecutive days, trading near 17,850 during European trading hours on Wednesday, October 15, 2025. The decline in the Rupiah's value follows the announcement of the Bank Indonesia (BI) interest rate decision. Despite maintaining its benchmark interest rate at 5.75%, BI officials clarified that the rate hikes introduced in May and June were precautionary measures aimed at addressing global economic developments.

The central bank highlighted its use of innovative policies to tackle ongoing global uncertainty and emphasized the adequacy of the current interest rate level. Meanwhile, global economic growth remains sluggish at 3% in 2026, with global inflation anticipated to average around 4%. Amid this subdued global climate, monetary policy is tightening worldwide, potentially leading to further US rate hikes.

Meanwhile, the US Dollar (USD) is gaining strength due to hawkish expectations from the Federal Reserve (Fed), which has signaled potential further rate increases before the year's end. Traders are now focusing on the upcoming US Preliminary Purchasing Managers' Index (PMI) data released later on the same day. Analysts at ING point out that the US Dollar continues to exhibit strong resilience amidst lower energy prices and a risk-friendly environment, suggesting that the Federal Reserve's hawkish stance is a significant driver of the dollar's demand.

The recent Bank Indonesia interest rate decision underscores the central bank's commitment to stabilizing the Rupiah and optimizing policy tools to attract foreign capital inflows.