Economist: There is a Room For BI Rate Reduction In Semester II 2024

Photo: Doc. Antara

JAKARTA - Economist Josua Pardede assesses that the room for a reduction in the BI-Rate interest rate remains open in the second semester of 2024, taking into account domestic inflation pressures and the prospect of a reduction in global interest rates.

"Considering the latest developments from the global and domestic side, we assess that the room for a reduction in the BI-Rate interest rate in the second semester of 2024 remains open," said Josua, quoted from Antara, Wednesday, March 20.

According to him, the cautious approach of the Central Bank of the United States (US) or The Fed towards reducing interest rates in 2024, as well as the domestic inflation pressure that still exists in the first half of this year due to El Nino, supports the potential for BI to still maintain interest rates BI-Rate in semester I 2024.

Overall, his party maintains its projection that the BI-Rate will fall 50 basis points to 5.50 percent by the end of 2024.

The Chief Economist of Bank Permata said that the increase in volatile price inflation and the decline in the trade surplus limited the potential for an early decline in the BI-Rate.

In February 2024, there was a significant increase in the Consumer Price Index (CPI) inflation rate, which rose from 0.04 percent month on month (mom) to 0.37 percent mom.

On an annual basis, the inflation rate also increased, reaching 2.75 percent year on year (yoy) compared to 2.57 percent (yoy) in January 2024. The increase in inflation was mainly driven by movements in food prices, especially rice.

The trade surplus in February 2024 decreased significantly to 0.87 billion US dollars from 2 billion US dollars in the previous month.

The decline in exports was caused by lower demand from China during the long Lunar New Year holiday, while imports increased due to increased purchases of oil and consumer goods, especially rice, in anticipation of higher demand ahead of Ramadan this year.