Bank Indonesia (BI), has decided to keep its benchmark interest rate (BI Rate) at 6.25 percent, the deposit facility rate at 5.5 percent, and the lending facility rate at 7 percent, according to reporting from Jakarta Globe.
Governor Perry Warjiyo said that this decision aligns with BI’s commitment to stability, aiming to further stabilize the rupiah and manage inflation within the target range of 2.5 plus-minus 1 percent for 2024 and 2025.
“These decisions are consistent with our pro-stability monetary policy focus, aimed at strengthening the rupiah and ensuring inflation remains controlled,” Warjiyo said during a press conference on Wednesday (21/8/24.)
Jakarta Globe reports that the global economy is projected to grow by 3.2 percent in 2024, with signs of a slowdown. The US economy is anticipated to decelerate in the second half of the year due to reduced domestic demand. Meanwhile, China’s economic recovery remains weak, while Europe continues to show improvement.
Inflation is decreasing and remains within the target range. The Consumer Price Index (CPI) for July 2024 recorded an inflation rate of 2.13 percent year-on-year (yoy), down from 2.51 percent yoy in June 2024.
As of August 20, the rupiah has strengthened to IDR 15,430 per USD, marking a 5.34 percent appreciation from the end of July 2024. This strengthening is more significant compared to the appreciation of other regional currencies, including the Thai Baht, Japanese Yen, Philippine Peso, and South Korean Won, according to Jakarta Globe.
“BI continues to strengthen policy coordination with the government to mitigate risks from ongoing global uncertainties,” Warjiyo said.
Economist Hosianna Evalita Situmorang from Bank Danamon said that the potential for a rate cut depends on Federal Reserve policies in September and US economic data developments.
Hosianna noted that if US economic data, particularly labor and inflation indicators, weaken further, it could support a BI rate cut in Q4 2024. She highlighted that foreign investors are currently favoring Indonesia, with expectations of a possible Fed rate cut making Indonesian financial assets more attractive.
“However, even with lower Fed rates, a sluggish global and regional outlook may not necessarily drive up the rupiah’s value, as investors may still prefer safe havens,” Hosianna said.
Source: Jakarta Globe
Stock image by Wikipedia Creative Commons
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