Rupiah Strengthens, BI Rate Potentially Down 25 Basis Points

Bank Indonesia (photo: dock. Antara)

JAKARTA - Bank Indonesia (BI) will announce the direction of interest rates or Bi-rate at the Board of Governors Meeting (RDG) 20-21 August 2024.

Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira said that Bank Indonesia (BI) is expected to cut the BI-rate 25 basis points (bps) to 6 percent at the August 2024 Board of Governors Meeting.

"BI is expected to cut 25 bps interest rates," he explained to VOI, Wednesday, August 21.

According to Bhima, by cutting interest rates by 25 basis points as an anticipatory step from the Fed which will reduce the Federal Funds Rate (FFR) by 25 bps.

"So BI will follow the Fed's decision in addition to considering a strengthened rupiah exchange rate," he said.

Previously in the RDG in July 2024, Bank Indonesia (BI) decided to maintain the benchmark interest rate or BI Rate at 6.25 percent. In addition, BI also maintains the deposit facility interest rate and lending facility interest rate at 5.50 percent and 7.0 percent, respectively.

BI Governor Perry Warjiyo said he decided to maintain the benchmark interest rate at the level of 6.25 percent as a prostability monetary consistency measure.

"The Meeting of the Board of Governors (RDG) of Bank Indonesia on July 16-17, 2024 decided to keep the BI-Rate at 6.25 percent," Perry said at a press conference, Wednesday, July 17.

Perry said that he decided to maintain this interest rate consistent with the monetary policy of pro-stability as a pre-emptive and forward looking step to ensure inflation remains under control within the target of 2.5 percent plus minus 1 percent in 2024 and 2025 in line with the pro-stability monetary policy stance.

Perry said that the focus of monetary policy in the short term was directed to strengthen this policy, supported by strengthening monetary operations to strengthen the effectiveness of stabilizing the Rupiah exchange rate and attracting foreign portfolio inflows.