Permata Economist Reveals Limited Reference Interest Rate Reduction

JAKARTA - Head of Bank Permata Economist Josua Pardede said Bank Indonesia has room for a limited BI Rate decline at the Board of Governors of Bank Indonesia (RDG BI) meeting in December 2024 on Wednesday, December 18.

According to Josua, Bank Indonesia has the potential to cut interest rates or BI Rate if the signal of cutting the Fed Fund Rate (FFR) interest rate at the Federal Open Market Committee (FOMC) December 24 is getting stronger.

"We see that the BI Rate can go down if the FFR signal is cut in the FOMC December 2024, getting stronger, and the rupiah does not reach Rp. 16,000 per US dollar, where at the time of submit the Forecast number, we see the space is quite open," he explained in his statement, Wednesday, December 18.

Josua said that in line with its development towards the RDG December 2024, the cutting space was narrowing due to the weakening of the Rupiah due to the strengthening of the US Dollar Index after the world's central bank apart from the Fed tended to be more dovish in its monetary policy.

"We still see that the timing for the BI Rate being lowered at the RDG in December can still be done, although it is limited from before," he said.

Josua said, seeing the development of domestic inflation as low, the trade balance surplus increased due to the drop in imports which showed the domestic economy tended to weaken.

In addition, foreign funds have been re-entered into the state securities market (SBN) in December 2024, although it is still relatively small and the stock market is still listed as a net outflow since October 2024.

Therefore, the chances of a decrease in the BI Rate are more limited.