BI Fixed Rate 5.75 Percent Can Maintain Economic Stability
JAKARTA - Bank Indonesia (BI) maintains the BI-rate benchmark interest rate at the level of 5.75 percent at the Board of Governors' Meeting (RDG) in February 2025.
Head of Bank Permata economist, Josua Pardede, said that this decision aims to maintain stability amid increasing external risks, especially concerns about the trade war and the Fed's higher-for-longer monetary policy stance.
"We estimate that BI will continue to balance growth and stability in 2025, by conducting assessments on external and domestic indicators," he told VOI, Thursday, February 20.
Josua estimates that the space for further BI interest rates reduction in the future will depend heavily on the development of global and domestic data.
However, Josua said that because the risk of trade war and currency war is ongoing, it is still projecting that BI-rate will remain at the level of 5.75 percent by the end of the year.
Josua said that on the external side, the market estimates that the Fed will lower the FTR by only 25bps in the second half of 2025, so that the risk to Rupiah's stability remains high.
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Meanwhile, from within the country, the widening current account deficit (CAD) poses a risk of stability, especially in the midst of the government's pro-growth agenda that will encourage imports, and the Trade War 2.0 which can weaken exports so as to limit the flexibility of lowering the benchmark interest rate.
"The current low inflation is seen as temporary, driven by discounted electricity rates ending in February 2025," he explained.