The Central Bank Keeps The Interest Rate At 6 Percent

Dok. TEMPO/ Dinul Mubarok

The Central Bank Keeps The Interest Rate At 6 Percent

Friday, 28 Feb 2025

Bank Indonesia (BI) has decided to keep the BI 7-day Reverse Repo Rate at 6 percent during the Board of Governors Meeting held on December 17-18, 2024. As a result, the deposit facility rate remains at 5.25 percent, and the lending facility rate stays at 6.75 percent. "The Board of Governors Meeting on December 18-19, 2024, decided to maintain the BI Rate at 6," said BI Governor Perry Warjiyo at a press conference on Wednesday (December 18, 2024).

Perry further explained that the focus of monetary policy is to strengthen the stability of the rupiah amid rising geopolitical uncertainties and global economic conditions influenced by U.S. policy developments. The central bank observes that global financial market uncertainties are increasing, along with risks of a global economic slowdown.

The U.S. trade policy, which is becoming more protective through higher import tariffs and broader coverage, is expected to increase trade fragmentation worldwide. "This situation, along with escalating geopolitical tensions in various regions, is likely to slow global economic growth to 3.1 percent in 2025," Perry stated. Additionally, risks to global supply chains could lead to rising inflation, ultimately affecting the policy direction of the U.S. central bank, The Federal Reserve (The Fed). BI predicts that the pace of rate cuts by The Fed will be slower due to rising inflation in the U.S.

At the same time, yields on U.S. government bonds remain high due to significant spending and debt financing needs. "The strengthening of the U.S. dollar continues, along with a shift in global investor preferences back to the United States," Perry added.

Despite this, Indonesia's economic growth is expected to remain stable, backed by predictions of higher investment growth, supported by the completion of various national strategic projects and private investments. Additionally, household consumption is believed to continue growing, fueled by steady consumer confidence and the positive effects of simultaneous regional elections. "Government consumption is increasing due to higher government spending activities at the end of the year," said Perry.

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