DBS Group Research economist Radhika Rao highlights that Indonesia’s onshore markets are under pressure, with the Rupiah at record lows and equities near six‑year lows. She notes that Bank Indonesia’s mandate will be broadened to include the real sector, while fiscal and oil‑related pressures build. Despite the expanded mandate, DBS expects monetary policy to stay focused on financial market stability and further rate tightening.

Rupiah weakness and BI mandate shift

"Indonesia’s onshore asset markets have been under pressure, with the IDR depreciating to an all-time low past 18000/USD (down ~7.5% ytd) and the benchmark equity index at a near six-year low."

"Without fuel price adjustments to temper demand, higher global oil prices and a weak rupiah are likely to weigh on the trade balance and, consequently, the current account math."

"Separately, parliament passed a revision to the finance law this week, which amongst other changes, will broaden BI’s mandate to include the real sector (and potentially job creation)."

"Despite proposed changes to the mandate, we expect monetary policy to prioritize financial market stability in the near-term and tighten rates further to defend the currency."

"On bonds, the yield curve shifted higher across tenors this week, maintaining the bear flattening bias."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)