Higher for Longer Rates Pressure on the Rupiah

Indonesia’s external balances will face hard times if the Federal Reserve’s interest rates remain high.

Yopie Hidayat

September 25, 2023

INTEREST rates are expected to remain high for an extended period following the recent decision by the Federal Reserve last week. The Fed chose to keep its rates unchanged at 5.25 percent to 5.5 percent, but they gave a signal for a potential increase toward the end of the year. Market consensus suggests that any rate decrease from the Fed may not occur until at least Q3 2024, resulting in a prevailing negative sentiment in the financial markets.

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