Bank Indonesia (BI) is stepping up market intervention strategies to stabilise the domestic currency against elevated global financial volatility, central bank officials confirmed following a restricted cabinet meeting on economic policy at the Presidential Palace on October 19, Tempo reports.
BI Governor Destry Damayanti stated that President Prabowo Subianto instructed the central bank to maintain active market oversight and evaluate the ongoing efficacy of its monetary stabilisation instruments.
"Essentially, Bank Indonesia will always remain present in the market," Governor Damayanti noted. To mitigate spillovers from global interest rate volatility, the central bank is deploying a multi-pronged intervention strategy, including market interventions with direct operations across spot foreign exchange markets and offshore Non-Deliverable Forwards (NDF). The central bank will also continue to hedge fee support frameworks, introduced in late June to bolster foreign capital retention.
As for capital inflows, the bank plans to have foreign exchange liquidity measures, including swap facilities and Domestic Non-Deliverable Forwards (DNDF), secured between $8.0bn and $8.5bn in cumulative capital inflows.
Alongside exchange rate stabilisation, Bank Indonesia continues to target domestic price stability.
Core inflation remained well-anchored at 2.8% in September, though volatile food inflation climbed to 5.0%. To curb food price pressures, the central bank is deepening operational coordination with the Ministry of Agriculture to bring volatile food inflation back within its 2.5% (±1%) target band.
The central bank cited sustained higher-for-longer monetary policy stances in developed economies as the primary source of external pressure on emerging market currencies. While BI assesses the probability of a US Federal Reserve interest rate hike in October as low, policymakers confirmed close monitoring of global rate trajectories to defend the resilience of the rupiah.