Jakarta Globe is reporting that Bank Indonesia (BI) has decided to keep its benchmark interest rate at 6 percent to maintain inflation within its target range of 2.5 percent for 2024 and 2025, while also supporting sustainable economic growth amid global uncertainties.
“Monetary policy is focused on strengthening the stability of the rupiah, particularly due to rising global economic uncertainties linked to US policy direction and heightened geopolitical tensions across various regions,” BI Governor Perry Warjiyo said during a press conference in Jakarta on Wednesday (18/12/24.)
BI forecasts global economic growth to slow to 3.1 percent in 2025, down from 3.2 percent in 2024. The central bank stated that global financial market volatility, along with the risks of slower economic growth, continues to pose challenges. Perry pointed to US trade policy, including tariff hikes on imports and commodities, which are increasing the risk of fragmented global trade, says Jakarta Globe.
Inflation worldwide is also rising beyond earlier expectations, driven by supply chain disruptions. Meanwhile, the US Federal Reserve’s interest rate is expected to grow more slowly due to persistent inflation, and the US fiscal policy remains expansive. These factors are keeping US Treasury yields high, adding pressure on global currencies and curbing foreign capital inflows to emerging markets, according to Jakarta Globe.
“The global economic environment, along with ongoing uncertainties in financial markets, requires strong policy responses to mitigate the negative impacts on emerging economies, including Indonesia,” Perry said.
Looking ahead to Indonesia’s own economic outlook, BI projects growth for 2025 to range between 4.8 percent and 5.6 percent. The central bank plans to continue supporting growth from both the demand and supply sides of the economy, aligning its policies closely with government fiscal stimulus efforts.
Source: Jakarta Globe
Image: Wikimedia Creative Commons
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