Jakarta steps up battle to defend rupiah after governor's exit
Bank Indonesia ramped up efforts to prop up the rupiah, pledging to broaden its policy tools beyond interest rates after Governor Perry Warjiyo’s surprise resignation rattled markets.
Source: RSS · July 31, 2026 at 3:02 AM · AI-assisted report
JAKARTA, 31 JULY 2026 —
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Bank Indonesia ramped up efforts to prop up the rupiah, pledging to broaden its policy tools beyond interest rates after Governor Perry Warjiyo’s surprise resignation rattled markets.
Market Impact
“The optimisation of the monetary policy mix to maintain the rupiah exchange rate stability has been enhanced,” Erwin Hutapea, Bank Indonesia’s executive director of monetary and securities management, said in a statement. The central bank now plans to deploy additional instruments alongside its policy rate to curb inflation and support growth amid rising global uncertainty.
Warjiyo’s abrupt departure on Monday left the rupiah at a near-record low and deepened concern over policy continuity under President Prabowo Subianto. Since his exit, both the currency and the Jakarta Composite Index have extended declines, erasing earlier gains and reviving memories of the volatility that followed the government’s populist spending plans.
Hutapea’s statement underscores Bank Indonesia’s shift away from relying solely on interest rates toward macro-prudential measures, according to Wee Khoon Chong, senior Asia-Pacific market strategist at BNY. “The comment today is standard, but interesting to see they will be refining monetary tools beyond policy rates,” he said. The move signals the central bank may now prioritise broader financial stability tools instead of further rate hikes.
Macro-prudential policy focuses on safeguarding the financial system as a whole, using tools such as liquidity requirements or loan-to-value limits rather than just adjusting benchmark rates. Bank Indonesia’s pivot points to a more cautious approach after years of aggressive tightening, reflecting concern that higher rates could further strain household debt and crimp growth.
The rupiah has fallen about 3% against the dollar since Warjiyo’s resignation, adding pressure on Bank Indonesia to act quickly. The central bank has intervened in both the spot and derivatives markets to slow the slide, traders said, though the scale of support remains unclear.
For Malaysian businesses with rupiah-denominated exposures, the currency’s renewed weakness raises hedging costs and could squeeze profit margins on Indonesian operations. With global risk sentiment fragile amid US-China tensions and oil price swings, Bank Indonesia’s expanded toolkit may provide only temporary relief unless broader policy confidence is restored.
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