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Is The Reduction Of The BI Interest Rate To 5.75 Percent Beneficial For The Indonesian Economy?

Bank Indonesia (BI) has made the decision to lower the BI 7-Day Repo Rate, also known as the BI Rate, by 25 basis points (bps) to a level of 5.75 percent. This decision regarding the benchmark interest rate was reached during the BI Board of Governors Meeting (RDG). What implications does this have for the Indonesian economy? Coordinating Minister for Economic Affairs Airlangga Hartarto addressed this question following the BNI Investor Daily Round Table event in Jakarta on Wednesday, January 15, 2025. Airlangga expressed the government's support for Bank Indonesia's decision to reduce the benchmark interest rate. 

He stated that this policy is expected to have a positive impact on the economy, particularly in enhancing the purchasing power of the public. "Certainly, any measure that can reduce high costs will improve purchasing power," Airlangga remarked. It is noteworthy that during the press conference for the RDG on January 15, 2025, BI Governor Perry Warjiyo announced the reduction of the BI Rate by 25 basis points. Additionally, the lending facility interest rate was set to decrease by 25 bps to 6.5 percent, while the deposit facility interest rate also fell by 25 bps to 5 percent. 

Impact of the BI Rate Reduction on Banking   

 the effects of the BI Rate reduction on the banking sector? One of the state-owned banks, PT Bank Mandiri (Persero) Tbk, or BMRI, views Bank Indonesia's decision to lower the BI Rate by 25 bps to 5.75 percent as a strategic move. Corporate Secretary of Bank Mandiri, M. Ashidiq Iswara, indicated that this decision will positively influence economic growth and the stability of the financial sector. "Gradually, the reduction in the benchmark interest rate will enhance liquidity and encourage a decrease in lending rates," he stated in a written statement on Wednesday, January 15, 2025. 

Ashidiq further noted that this development is expected to strengthen credit demand across various sectors. Moreover, the increase in market liquidity is likely to promote the growth of Third Party Funds (DPK) and contribute to a reduction in the cost of funds. 

Tag: Bank Indonesia BI Interest Rate