A researcher has assessed that there is room to cut the BI-Rate until the end of 2024 although the Indonesian Central Bank (Bank Indonesia or BI) has decided to maintain the benchmark interest rate at six percent in October 2024.
Macroeconomics and Financial Market Researcher at the Institute for Economic and Social Research at the Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), Teuku Riefky, said the possibility for BI-Rate cut is because the rupiah exchange rate has begun to stabilize in the past week, which is a good news in the monetary aspect.
“With less than three months left in 2024, we assess that the Indonesian Central Bank still has room to cut interest rates further in the remainder of this year,” Riefky, said as quoted Katadata on Wednesday, October 16, 2024.
The decision to maintain the BI-Rate at 6 percent was taken after the BI Board of Governors Meeting in October 2024.
“This decision is consistent with the direction of monetary policy to ensure inflation remains under control within the target of 2.5 percent plus minus 1 percent in 2024 and 2025 and to support sustainable economic growth,” BI Governor Perry Warjiyo told a press conference in Jakarta on Wednesday, October 16, 2024.
He said the decision was taken to support sustainable economic growth and focus on short-term policies to stabilize the rupiah exchange rate.
“This is because there is still financial uncertainty in the global market,” Perry noted.
In addition, the central bank also maintained the deposit facility interest rate at 5.25 percent and the lending facility interest rate at 6.75 percent.
Riefky assessed that the BI interest rate cut could be used in the future to boost aggregate demand in the real sector. This is necessary if the deflationary trend continues.
Perry added that currently BI is also continuing to focus on the stability of the rupiah exchange rate, in line with the increasing uncertainty in the global financial market. Going forward, BI will continue to monitor the room to reduce policy interest rates while still paying attention to the prospects for inflation, the rupiah exchange rate, and economic growth.
