USD/IDR: Rupiah to trend gradually lower over 2022 – ING

Bank Indonesia (BI) is set to hold rates steady again next year even though the economic recovery is gathering pace. Subsequently, economists at ING expect the Indonesian rupiah to come under slightly downside pressure throughout the next year. 

Bank Indonesia to keep IDR volatility low

“Growth is expected to pick up further in the coming quarters as long as the pandemic remains subdued. Efforts to accelerate the vaccination rollout remain very important given that only 29% of the population is fully vaccinated.”

“BI has kept policy rates untouched in 2021 and will likely retain this accommodative stance well into next year. With inflation below the central bank target, we expect BI to keep rates at 3.50% well into next year and will only consider adjusting rates when the Fed begins its rate hike cycle.”

“We do expect the trade surplus to remain in place in the near term, we also expect some volatility ahead for the IDR, especially as we edge closer to the Fed lift off next year. This development, alongside a dovish Bank Indonesia, suggests at least some modest depreciation for the IDR as we head into 2022.”