BI Rate Is Expected To Drop If The Fed Lowers Its Interest Rates

JAKARTA - Bank Permata economist Josua Pardede estimates that Bank Indonesia (BI) will only lower the BI Rate after the Fed begins to lower its policy interest rate.

"We estimate that future BI-rate movements will be greatly influenced by changes in Fed policy interest rates," he told VOI, Tuesday, May 21.

Josua said that BI's future monetary policy direction regarding policy interest rates would depend heavily on global economic developments, especially in the US and the Middle East.

According to Josua before the RDG in April, BI indicated that its decision to reduce the BI-rate would not be influenced by the Fed's reference interest rate decision. However, at the RDG last April, the signal distance from BI seemed to change.

Josua melihat, peluang penurunan BI-rate akan muncul ketika the Fed mulai menurunkan suku bunga acuannya.

Therefore, Josua said that because he anticipated that the Fed would only reduce the Fed Funds Rate by 25 bps in December 2024, he estimated that the benchmark interest rate of Bank Indonesia (BI) or BI-Rate at the level of 6.25 percent would last until the end of 2024.

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

According to Josua, taking into account the risks of the Fed's policy scenario which is higher for longer.

This suggests the possibility of lowering interest rates will be open by 2025.