LPEM FEB UI Predicts BI To Hold Interest Rates At 4.75 Percent On November RDG

Photo: Special

JAKARTA - The Institute for Economic and Community Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) projects that Bank Indonesia (BI) is expected to maintain interest rates or BI-Rate at the level of 4.75 percent at the Board of Governors Meeting (RDG) 18-19 November 2025.

"(Bank Indonesia) maintains a policy interest rate of 4.75 percent in the upcoming Board of Governors Meeting will support Rupiah's stability and strengthen confidence in Bank Indonesia's policy stance," Macroeconomic Economist and LPEM Finance Market FEB UI Teuku Riefky said in his statement, Tuesday, November 18.

Teuku said Indonesia entered the last quarter of 2025 with increasing inflation, increasing external pressure, and increasing investor caution.

According to him, general inflation rose in October as food prices remained high due to supply disruptions related to weather and rising gold prices continued to encourage an increase in core components.

He added that at the same time, capital outflows increased despite the Fed cutting interest rates, driven by growing concerns over fiscal and quasi-fiscal risks, especially after the government's plan to take over high-speed rail debt

"This development weakens the rupiah and increases the importance of policy credibility," he explained.

He added that Indonesia experienced an ongoing outflow of capital between mid-October 2025 and mid-November 2025 of US$0.95 billion which was almost entirely caused by sales by foreign investors in the government bond market.

The outflow from the bond market reached USD 1.77 billion, while the stock market recorded a net flow of USD 0.82 billion in the same period.

Teuku added, overall, the latest developments indicate more careful policy arrangements for November.

"Inflation is starting to increase and has the potential to rise further along with the peak of seasonal demand, while the outflow of the portfolio and the weakening of the rupiah confirms the importance of maintaining external stability," he explained.

Di sisi lain, ia menyampaikan kekhawatiran yang semakin meningkat tentang risiko fiskal dan quasi-fiskal meningkatkan sentimen investor terhadap sinyal kebijakan.

Dalam situasi ini, menurutnya, mempertahankan suku bunga kebijakan di level 4,75 persen akan memberikan acuan yang diperlukan, serta membantu membatasi tekanan pada mata uang dan memperkuat kepercayaan terhadap kemandirian kebijakan Bank Indonesia.

On the other hand, he expressed growing concerns about fiscal and quasi-fiscal risks increasing investor sentiment towards policy signals.

In this situation, according to him, maintaining policy interest rates at the level of 4.75 percent will provide the necessary references, and help limit pressure on the currency and strengthen confidence in Bank Indonesia's policy independence.