LPEM UI Suggests BI To Maintain BI Rate 5.75 Percent To Maintain Rupiah Stability

JAKARTA - The Institute for Economic and Community Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) advised Bank Indonesia (BI) to maintain a benchmark interest rate (BI-Rate) of 5.75 percent in order to maintain the stability of the rupiah exchange rate.

"Despite the trend of inflation and movement of the rupiah indicating a space for policy changes, early easing could risk changing the recent achievement of currency stability," said LPEM UI economist Teuku Riefky in Jakarta, quoted by Antara, Wednesday, May 21.

According to him, adjustments to interest rate policies need to be carried out carefully and in line with various signals from the global monetary market, especially the Federal Reserve (The Fed).

He agrees that the rupiah has moved more stably in the past month and inflation has re-entered BI's target, providing room for a potential reduction in the central bank's benchmark interest rate.

However, the reciprocal tariff policy of the President of the United States (US) Donald Trump still overshadows global trade so that it still opens up wide space for market volatility.

Despite the moderation of US-China tensions, the scope and time for implementing tariffs in the future is still difficult to predict.

At the same time, the Fed chose to maintain a benchmark interest rate of 4.25 percent to 4.5 percent at a meeting in May 2025.

"For the time being, BI must remain vigilant and continue to use the necessary stabilization devices to maintain macroeconomic stability," said Riefky.

The head of the Bank Central Asia (BCA) Economist David Sumual expressed the same view.

According to him, BI is still focused on stability, triggered by uncertainty in the tariff war. The Fed also still maintains the benchmark interest rate.

In addition, there are also indications of a slowdown in consumption, although the factor is more due to high-base effect (last year's election) and less than optimal government spending.

However, the market does not have one voice in the prediction of the BI benchmark interest rate on RDG this time.

Banjaran Chief Economist of Bank Syariah Indonesia (BSI) Surya Indrastomo projects that BI-Rate will participate in the results of the May 2025 Board of Governors Meeting (RDG) today considering that the volatility of the rupiah has been relatively maintained.

Banjaran noted, from a global point of view, temporary truce or voltage of arms' while the US-China tariff war has reduced the escalation of tensions and uncertainties.

On the other hand, Indonesia needs a more pro growth rate as a catalyst to encourage growth so that adjustments from Bank Indonesia will greatly help the Indonesian economy.

According to Banjaran, the interest rate differential between Indonesian securities compared to countries in ASEAN is also still quite competitive.

He argues that this RDG is the right momentum for BI to lower interest rates.

Similarly, Bank Mandiri Chief Economist Andry Asmoro also saw a pruning space. In addition to encouraging economic growth, the pressure of the rupiah should not be as high as in the early period in the first quarter.

Inflation is also considered to remain low in the range target of Bank Indonesia. Finally, Indonesia's benchmark rate compared to other countries is also still relatively competitive.