BI Is Advised To Maintain BI-Rate At 6.25 Percent

Bank Indonesia (Photo: Antara)

JAKARTA - The University of Indonesia's FEB Institute for Economic and Community Research (LPEM FEB UI) suggested that Bank Indonesia maintain BI-Rate at the level of 6.25 percent at the Board of Governors' Meeting (RDG), Thursday, June 20.

Bank Indonesia needs to maintain its policy interest rate at the level of 6.25 percent, quoted from the LPEM FEB UI macroneconomic analysis series related to the BI RDG June 2024, Thursday, June 20.

LPEM FEB UI explained several reasons so that BI would not increase the BI-Rate in the RDG this June, even though the rupiah exchange rate was in a weakening trend caused by the strengthening of the US dollar, the impact was not only felt by Indonesia but globally.

Meanwhile, several other Asian currencies also show similar depreciation patterns. Baht Thailand, Ringgit Malaysia, and Won South Korea, for example, all of them were depreciated against the US dollar in the same period.

In addition, year-to-date (ytd), the rupiah has been depreciated at 7.07 percent ytd, showing moderate performance compared to other currencies.

Despite these challenges, Indonesia's foreign exchange reserves increased by 2.8 billion US dollars, up from 136.2 billion US dollars in April 2024 to 138.97 billion US dollars in May 2024. This increase in foreign exchange reserves is supported by the issuance of global bonds, inflows into the domestic bond market, and investment in SRBI.

As a result, Indonesia's foreign exchange reserves are currently equivalent to 6.3 months of imports or 6.1 months of imports plus government foreign debt payments, which significantly exceed international standards for the adequacy of foreign exchange reserves, which is around three months of imports.

Then, Inflation continues to decline and remains within the range of Bank Indonesia's targets due to reduced demand from consumers after Eid and stable food prices due to the ongoing harvest season. Although the Rupiah has been depreciated over the past four weeks, the increase in foreign exchange reserves provides a significant buffer to this pressure.

In addition, the difference in interest rates with the United States is currently under control while the strategy of three interventions of Bank Indonesia is increasingly supporting currency stability. Therefore, Bank Indonesia needs to maintain its benchmark interest rate at the level of 6.25 percent at the upcoming Board of Governors meeting