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Bank Indonesia Holds Interest Rate At 6.25% To Safeguard Rupiah Stability
Bank Indonesia (BI) has decided to maintain its benchmark interest rate at 6.25% for the fifth consecutive meeting. This policy is a proactive measure to stabilize the Rupiah against a strengthening US Dollar and heightened global uncertainty. Governor Perry Warjiyo stated that the move is consistent with a focus on maintaining exchange rate stability. (Doc. bi.go.id)
Jakarta – Bank Indonesia's Board of Governors has unanimously decided to maintain the BI-Rate, the nation's key monetary policy instrument, at 6.25%. This decision, announced after the two-day meeting on May 21-22, 2024, marks the fifth consecutive period of holding rates steady. The Deposit Facility and Lending Facility rates also remain unchanged at 5.50% and 7.00%, respectively.
Governor Perry Warjiyo emphasized that this policy stance is a preemptive and forward-looking measure to ensure the stability of the Indonesian Rupiah. The decision is deemed necessary amidst persistent uncertainty in global financial markets, primarily driven by shifting expectations regarding the timing of interest rate adjustments by the United States Federal Reserve.
The Rupiah has faced significant pressure in recent months due to a robust US Dollar and ongoing global risk aversion. By holding rates high, BI aims to maintain an attractive interest rate differential, thereby supporting capital inflows and stabilizing the national currency. A stable exchange rate is crucial for controlling imported inflation and maintaining macroeconomic stability.
BI's assessment indicates that domestic inflation remains under control within its target corridor of 2.5% ± 1%. However, the central bank remains vigilant of potential risks, including administered price adjustments, volatile food prices, and the ongoing impact of global energy price fluctuations on transportation costs.
Beyond the interest rate policy, Bank Indonesia continues to strengthen its monetary operations strategy. This includes optimizing its operations in the money market and foreign exchange market to enhance the effectiveness of monetary transmission and further support Rupiah liquidity management.
The institution also reaffirmed its commitment to synergistic policy coordination with the Government. This collaboration is focused on maintaining stability and fostering sustainable economic growth through fiscal measures, structural reforms, and maintaining the momentum of domestic demand.
Looking ahead, Governor Warjiyo stated that Bank Indonesia's future monetary policy direction will remain data-dependent and focused on stabilizing the Rupiah. The central bank will monitor global developments, particularly the Fed's policy and global commodity prices, alongside domestic inflation trends and economic growth indicators.
BI projects that Indonesia's economic growth will remain solid, supported by resilient domestic demand. Sustained household consumption and increased investment activity, particularly related to strategic national projects, are expected to be the main drivers of economic expansion throughout the remainder of 2024.
(Hasyam Hanash)
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