BI-Rate Is Predicted To Stay At 6.25 Percent By The End Of 2024

JAKARTA - Bank Permata economist Josua Pardede estimates that the Bank Indonesia (BI) or BI-Rate benchmark interest rate at the level of 6.25 percent will last until the end of 2024.

"We estimate BI will maintain the BI-rate at the current level at 6.25 percent by the end of 2024," he explained to VOI, Tuesday, May 21.

According to Josua, taking into account the risks of the Fed's policy scenario which is higher for longer. This indicates that the possibility of lowering interest rates will open by 2025.

Josua melihat kondisi pasar keuangan di bulan Mei mulai menunjukkan perbaikan, didukung oleh easingnya kekhawatiran aksi geopolitik di Timur Tengah dan perkembangan data ekonomi Amerika Serikat, terutama tren penurunan inflasi AS.

Although in April 2024, pressure on the global financial market increased which ultimately forced BI to raise the BI-rate by 25 bps to 6.25 percent.

Josua conveyed that Indonesia's inflation data in April 2024, coinciding with the Eid celebration, began to decline. Therefore, the seasonal impact of increasing demand is offset by increasing food supply due to the harvest season.

However, Josua said risks from external and domestic remain. Globally, signals from many Fed officials are still showing signals that the Fed is not in a hurry to lower the policy interest rate of FFR even though the disinflation process in the US is still ongoing.

"This can limit the increasing sentiment of risk on which is currently increasing and thus limiting the potential for incoming capital flows," he said.

In addition, Josua conveyed that the narrowing of the trade surplus which had implications for widening the account balance deficit in the first quarter of 2024 was also a concern.

According to Josua, the risk of widening the deficit will continue in the second quarter of 2024, mainly driven by seasonal patterns from the peak payment of Indonesian financial instruments to non-residents in every second quarter.

"Therefore, domestic demand for the US dollar remains high, thus posing a risk to the stability of the Rupiah exchange rate," he said.