UOB economists Enrico Tanuwidjaja and Vincentius Ming Shen highlight that Bank Indonesia is prioritizing Rupiah stability over rate moves, keeping the policy rate unchanged while tightening FX regulations. Measures include lower FX purchase thresholds, higher DNDF and swap limits, and expanded macroprudential tools and local currency usage, as BI seeks to curb speculation, protect reserves and manage USD/IDR under heightened global and Middle East-related risks.

Rupiah stability drives BI toolkit shift

"BI kept its benchmark policy rate unchanged at 4.75% in Mar, alongside the deposit facility (3.75%) and lending facility (5.50%). The decision continues to aim at anchoring the rupiah stability while using other tools such as macroprudential measures to support economic growth amid global uncertainty and volatility, especially in light of the Middle East conflict."

"BI materially shifted its interest rate stance in Mar MPC by emphasizing FX stability as a priority via tightening its FX transaction thresholds regulations and expanded DNDF/swap limits to curb speculation. Macroprudential policies, promoting credit growth, LCT expansion, and QR cross-border payments will remain as important supporting policies towards achieving higher and more quality economic growth."

"In Mar MPC, BI placed greater emphasis on FX stability rather than navigating the “impossible trinity of monetary policy” as per prior month. Measures include halving the individual FX purchase threshold to USD50,000 (from USD100,000), raising domestic non-deliverable forward (DNDF) sell limits by 50% to USD10mn, and increasing USD swap buy-sell limits by 50% to USD10mn. BI embarked on these steps to curb speculative activity and safeguard FX reserves which came in lower to USD151.9bn in Feb."

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