UOB Projects BI Rate To Drop 2-3 Times This Year

JAKARTA - Head of Deposit & Wealth Management UOB Indonesia Vera Margaret said that her party projects that the benchmark interest rate of Bank Indonesia or BI rate will decrease by 2 to 3 times in 2025.

"This year we predict that the BI rate for rupiah will decrease about 2-3 times, the first has happened this January," said Vera Margaret in Jakarta, quoted by Antara, Saturday, January 25.

He said that the decline in the BI rate is expected to encourage consumption growth and the domestic market, so that business actors can continue to develop their business.

Even so, he said that the United States monetary condition and its central bank decision, The Fed, to lower its benchmark interest rate, the Fed Fund Rate/FFR, since September 2024 have been putting pressure on the rupiah due to capital outflows.

Vera said that her party projects that the rupiah will continue to be depressed throughout this year due to market expectations for the Fed, although the decline in FFR tends to slow down.

He stated that his party projected that the rupiah would be at the level of Rp. 16,500 by the end of 2025, after experiencing the largest pressure in the third quarter of 2025 which resulted in the rupiah exchange rate increasing to the level of Rp. 16,800.

"But, not only did the rupiah weaken, almost all currencies also weakened against the US dollar," he said.

Vera also reminded business actors and the public to mitigate the impact of weakening the rupiah value, because when the rupiah weakens, commodity prices tend to increase.

"So, when the rupiah weakens, the prices of goods entering Indonesia tend to be expensive," he said.

The increase in commodity prices is also predicted by the UOB economist team to have an impact on the increase in the level of domestic inflation which is estimated to reach 2.5 percent.

This figure is increasing compared to last year's projections, one of which is the International Monetary Fund (IMF) which predicts Indonesia's inflation rate of 2.3 percent in 2024.

"Because of the current trend and we see that food conditions are also continuing to rise, we see that there will be a slight increase (inflation rate) compared to the previous year (2024) from 2.3 percent to 2.5 percent," added Vera.

Governor of Bank Indonesia (BI) Perry Warjiyo stated that his party saw that there was still room to lower interest rates further.

He said that in determining the BI-Rate adjustment response, his party would consider the realization of the inflation rate compared to the government's target of 2.5 plus minus 1 percent.

"Secondly, how do we see a common goal, (that is) to encourage growth so that 5.2 percent of this year can be achieved," Perry said at the Press Conference on the Results of the Periodic Meeting of the Financial System Stability Committee (KSSK) I 2025 in Jakarta, Friday, January 24.