Aceh – Indonesia, The Rupiah has stumbled again, breaching the level of Rp18,000 per US dollar. On Tuesday (29/9) afternoon trading, the Garuda currency closed weak at Rp17,981 per US dollar, after briefly slumping to Rp18,012 per US dollar during the day.
Head of the Monetary and Securities Asset Management Department at Bank Indonesia (BI), Erwin Gunawan Hutapea, stated that the rupiah’s depreciation was driven by ongoing concerns over global inflationary pressures and fiscal risks.
These pressures align with the surge in global crude oil prices, which have surpassed US$108 per barrel amid the lack of an agreement regarding the opening of the Strait of Hormuz.
“This is fueling expectations of further US monetary policy tightening,” Erwin said in a written statement on Tuesday (29/9).
In addition to external factors, pressure on the rupiah also stemmed from the foreign exchange demand among importers approaching the end of the third quarter of 2026. Capital outflows from emerging market asset portfolios amid rising bond yields also added pressure to the rupiah.
Permata Bank Chief Economist Josua Pardede projected that if the rupiah continues to weaken and remains at the Rp18,000 per US dollar level, the impact felt by the public will be an increase in the cost of goods dependent on the US dollar.
According to him, this cost increase does not only target imported finished products, but also domestic goods whose production processes rely on foreign components.
Current production processes still rely on imports, especially for raw material requirements.
This is evident from Statistics Indonesia (BPS) data for January-July 2026, showing that raw and auxiliary material imports reached US$116.7 billion out of total imports of US$163.3 billion, or about 71.45 percent of overall imports.
The impact of the rupiah’s weakening can transmit to domestic prices through chemicals, electronic components, plastics and packaging materials, pharmaceutical ingredients, machinery and spare parts, as well as various other manufacturing production inputs.
“This also explains why the rupiah’s depreciation not only raises the prices of imported goods seen in stores, but can also increase the cost of goods produced in Indonesia,” Josua told CNNIndonesia.com on Tuesday (29/9).
He assessed that items to be closely monitored include wheat and soybean-based products, animal feed, medicines, healthcare products, electronics, vehicles and spare parts, as well as transportation and logistics costs.
For example, an increase in wheat and soybean prices will directly translate into higher prices for noodles, bread, tofu, and tempeh. Meanwhile, expensive animal feed directly impacts the surge in chicken and egg prices.
“The public does not necessarily have to buy imported goods directly to be impacted by the rupiah’s weakening,” Josua added.
Thus, the domino effect of the rupiah’s depreciation begins with a surge in import and production operational costs. As a result, the cost burden swells, forcing companies to raise product selling prices or cut profit margins.
This condition also triggers inflation. On the other hand, real public income drops, so inflation squeezes purchasing power and consumption rates. Furthermore, the decline in public purchasing power ultimately slows down sales figures in the business sector.
Other follow-up impacts include the potential holding back of new investment momentum and hindered labor absorption across various industrial sectors.
In addition to pressure from production cost channels, Josua revealed that the public will also be impacted through interest rate channels. If the trend of a weakening rupiah triggers an inflation surge, the room for BI to hold interest rates will narrow further.
Consequently, if interest rates must be kept high for longer, the public will bear the additional burden of costlier Home Ownership Credit (KPR) and vehicle credit installments, while MSMEs will face swelling working capital costs.
Nevertheless, according to the Head of the Center of Macroeconomics and Finance at the Institute for Development of Economics and Finance (INDEF), Rizal Taufikurahman, the strengthening of the US dollar against the rupiah actually provides benefits for certain domestic parties.
The strong dollar condition positively impacts the export sector, tourism industry, and remittance recipients. However, the greatest benefit from this dollar strengthening can only be enjoyed by exporters with high local content.
“(Conversely,) industries that rely on imported raw materials or hold foreign currency debt could instead come under pressure,” he said.
Rizal also noted that exchange rate depreciation does not automatically serve as the sole indicator of a crisis threshold. However, a rupiah remaining above Rp18,000 per US dollar and moving toward Rp18,500 per US dollar warrants vigilance, especially if accompanied by other negative indicators such as capital flight, rising SBN yields, shrinking foreign exchange reserves, and skyrocketing inflation.
“The main issue is not merely the level of the exchange rate, but the speed and persistence of its weakening,” Rizal stated.
Responding to this rupiah depreciation, Rizal advised BI not to automatically raise its benchmark interest rate, as it risks dampening credit disbursement and economic growth.
According to him, policy priorities should be directed toward strengthening market intervention and optimizing export foreign exchange supply. The option of raising the BI Rate or benchmark interest rate should be positioned as a last resort if the pace of depreciation starts to become difficult to control.