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The Central Bank Maintains The Benchmark Interest Rate At 6 Percent, And Here Are The Reasons For This Decision

Bank Indonesia (BI) has decided to maintain the BI 7-day Reverse Repo Rate at 6 percent during the Board of Governors Meeting (RDG) held on November 19-20, 2024. Consequently, the deposit facility rate remains at 5.25 percent, while the lending facility rate is set at 6.75 percent. BI Governor Perry Warjiyo stated that this decision to uphold the benchmark interest rate takes into account the controlled inflation, which is targeted between 1.5 percent and 3.5 percent for 2024 and 2025, and aims to support economic growth.

In October, the Consumer Price Index (CPI) inflation was recorded at 1.71 percent year-on-year, influenced by core inflation remaining stable at 2.21 percent and volatile food inflation decreasing to 0.89 percent. "The Board of Governors Meeting of Bank Indonesia on November 19-20, 2024, has decided to maintain the BI Rate at 6," Perry announced during a press conference at his office on Wednesday, November 20, 2024. He revealed that the focus of monetary policy is directed towards strengthening the stability of the rupiah amid increasing geopolitical uncertainties and global economic conditions, particularly in light of political developments in the United States. Nevertheless, BI remains open to the possibility of lowering the benchmark interest rate in the future, while continuously monitoring the movements of the rupiah exchange rate, inflation prospects, and evolving data and conditions. 

Additionally, BI will continue to guide macroprudential policies and payment systems to support sustainable economic growth. "A loose macroprudential policy will continue to be implemented to encourage banking credit and financing to priority sectors for growth and job creation, including MSMEs and the green economy, while adhering to prudential principles," he stated. The payment system policy is also aimed at fostering growth, particularly in the trade sector and MSMEs, by enhancing the reliability of payment system infrastructure and industry structure, as well as expanding the acceptance of payment system digitalization.

Throughout the year 2024, Bank Indonesia (BI) is expected to maintain its benchmark interest rate within the range of 6 percent to 6.25 percent. In January, February, and March, BI kept the interest rate at 6 percent. However, during the April Board of Governors Meeting (RDG), BI raised the benchmark rate to 6.25 percent, which was sustained until August. In the September RDG, BI decided to lower the interest rate back to 6 percent, a level that will be maintained until November. Prior to this, several economists had predicted that Bank Indonesia would keep its benchmark interest rate at 6 percent during the November 2024 RDG.

Tag: Bank Indonesia Consumer Price Index