Indonesia's Central Bank Says No Target Level for Rupiah
FEBRUARY 26, 2015
The rupiah fell to a 10-week low on Tuesday and is down nearly 4 percent so far this year, a trend which central bank spokesman Peter Jacobs attributed to the strengthening U.S. dollar and not due to Bank Indonesia's surprise decision last week to cut its benchmark interest rate.
The policy adjustment could weigh on the rupiah in the near term, analysts said.
After a meeting with the president and Bank Indonesia's governor on Tuesday, Chief Economics Minister Sofyan Djalil told reporters the central bank had not intervened significantly to defend the weakening rupiah.
"Why would we use our foreign exchange reserves to defend a falling currency if it was because of external factors?" Djalil said.
The central bank also remains on alert for changes in global financial conditions as the U.S. Federal Reserve prepares to normalize monetary policy, he added.
ING predicts further rate cuts, arguing the central bank's focus has shifted to supporting economic growth from the current account.
"We forecast one 25 basis point (bp) cut in 2Q and two 25 bp cuts in 4Q, when we expect inflation to fall sharply due to the November 2014 fuel price hike entering the base of comparison," ING economists said in a note on Thursday.