The Rupiah was said to have successfully strengthened 0.23% against the United States (US) dollar on Wednesday to Rp. 155/US$. Rupiah trading still shows a slump. There was also a pessimistic market condition in Wednesday's trading due to uncertain US inflation data.

US inflation is considered one of the reasons why global markets have become so pessimistic. In January, inflation was also reported to have grown 6.4% yearly, down from 6.5%. But the problem is that the released data is still higher than inflation.

US inflation is still challenging to reduce, and the market sees the US central bank as aggressive. The FED still has the opportunity to raise its benchmark interest rate aggressively. Many experts believe that this increase in interest rates will occur in March.

According to data from the CME Group's FedWatch, they see that interest rates can rise from 5.25% to 5.5%, which is three more times. That is, this expectation answers why the FED stated that interest rates could be higher than the initial projection if inflation increased again.

As a Result of The Release of Inflation Data, The Weakening of The Rupiah Is Considered to be Within Reasonable Limits

Technically, the key to the movement of the Rupiah is influenced by the US dollar. A difficult retracement level made the USD/IDR market move above the 200-day moving average with tremendous pressure. So, ahead of the release of inflation data, Rupiah will fall even further?

"The reality is we are acting on data, and if we continue to see data like a strong labour market or rising inflation again, then that will lead us to raise interest rates again higher than previously predicted," said Jerome Powell.

Thus, this could be one of the statements that make global markets more difficult to predict. Furthermore, the Rupiah exchange rate was also affected. However, experts say the weakening Rupiah exchange rate is reasonable and could rise again.

Bank Mandiri economist Reny Eka Putri observes that several sentiments will affect the Rupiah exchange rate. The US inflation rate, which fell even though it was still above predictions and consensus against the USD Dollar, was then considered short-term pressure.

Other economists also say there is still time for a slight rebound in the Rupiah's value. The economist projects that the Rupiah will move in the range of Rp. 15,150 per dollar to Rp. 15,250 per US dollar. High US inflation kept interest rates on hold for a long time.

Even so, the weakening of the Rupiah was accompanied by a surplus experienced by the Republic of Indonesia's trade balance. So because of this surplus, the Rupiah's decline is still considered to be within reasonable limits. However, will this weakening last longer?

Bank Indonesia is Predicted to Hold the Benchmark Interest Rate at 5.75% despite Indonesia's High Foreign Debt

In addition to the prediction of a weakening Rupiah due to US inflation which is still very high, market fluctuations are also predicted by the appearance of Bank Indonesia's benchmark interest rate in the range of 5.75%. 

The dollar's sentiment towards the global market keeps this going. It is believed that Bank Indonesia will maintain its benchmark interest rate at 5.75%. 

This decision will probably be taken at the end of February. Expectations of continued sloping inflation keep interest rates at 3.04 per cent at the end of this year with a stable movement.

In addition, the Rupiah exchange rate this year also continues a stable trend. Increased foreign exchange reserves in line with low core inflation supported this. However, the world is worried about Indonesia's debt reaching IDR 6,020 trillion.

Assumptions on the market also go hand in hand with how the BI vs Fed benchmark rates are. However, problems have increased following news from Bank Indonesia that RI's debt has reached IDR 6,020 trillion.