Bank Indonesia Is Believed To Will Again Maintain The Reference Interest Rate Of 3.50 Percent

JAKARTA - The determination of the benchmark interest rate of Bank Indonesia (BI) will be carried out today after the Board of Governors' Meeting. The determination of the BI rate is quite awaited considering the inflation rate has crawled up and the normalization of the Fed's monetary policy.

However, fundamental analyst Kanaka Hita Solvera (KHS) Raditya Pradana believes that Bank Indonesia does not have enough room to raise interest rates.

"According to our projection, BI will still hold interest rates at the level of 3.50 percent," he told VOI quoted Thursday, June 23.

Raditya explained, although inflation in May 2022 on an annual basis was higher than April 2022, the level was still within a manageable range.

“The basis is the reference set by Bank Indonesia, namely the inflation range this year is 3 percent plus minus 1 percent. Because it is still under control, we project that BI will still hold interest rates," he said.

He himself believes that the central bank will start to gradually raise the interest rate in the second half by up to 75 basis points (bps).

“We project that Bank Indonesia will start raising the benchmark interest rate by 50 bps to 4 percent in the third quarter. The BI rate is expected to increase by a total of 75 bps to 4.25 percent by the end of this year and to be at 5 percent in 2023," he said.

As is known, the monetary authority has not updated the benchmark interest rate level since 2020 with the current amount of 3.50 percent. This figure is the lowest in the history of the Indonesian central bank in response to the impact of the current pandemic.