Benchmark Interest Rate Potentially Down In Semester II 2024, This Is What BI Said

Illustration. (Photo: Doc. Antara)

JAKARTA - Bank Indonesia (BI) opens the opportunity to reduce the benchmark interest rate in the second semester of 2024, along with controlled inflation at the level of 2.5 plus minus 1 percent and stable rupiah.

BI Governor Perry Warjiyo said that in determining the BI rate policy, it was not because it followed the Fed which would also lower the benchmark interest rate. However, the US benchmark interest rate is only a consideration, while the dominant ones are inflation and the domestic rupiah.

"In determining the BI rate, it is considering the Fed Fund Rate (FFR) but will not follow the FFR. The original calculation regarding domestic conditions opens up opportunities for a decline in the second semester of 2024," Perry said at a press conference, Thursday, December 21.

On the other hand, Perry sees that global uncertainty has begun to subside due to the position of the United States (US) or Fed Fund Rate which is estimated to have reached the peak.

"With that development, we see the uncertainty of the global financial market has begun to subside," he explained.

However, Perry conveyed that the Dovish sentiment from the Fed will reduce the uncertainty of the global financial market so that it opens up opportunities for foreign funds to enter the developing country's financial markets, including Indonesia so that they can maintain the stabilization of the rupiah exchange rate and inflation in the future.

In addition, the last FOMC meeting gave the US economic signal that it would not fall into a deeper recession so that the US benchmark interest rate would be maintained until the end of the first semester of 2024.

Meanwhile, from within the country, Perry is optimistic that inflation will remain under control in the range of 2.5 percent plus minus 1 percent in 2024. Although there are still risks that come from the movement of food inflation.

"This is what we do from these results, we will determine the timing of the BI-rate (momentum of the benchmark interest rate)," he concluded.