Economist: BI Rare Is Projected To Drop Due To Rupiah Volatility Which Is Relatively Maintained

Photo: Doc. Antara

JAKARTA - Banjaran Chief Economist of Bank Syariah Indonesia (BSI) Surya Indrastomo projects that the benchmark interest rate of Bank Indonesia or BI-Rate will decrease in the results of the May 2025 Board of Governors' Meeting (RDG) today considering that the volatility of the rupiah has been relatively maintained.

"I see that this May RDG is the right momentum for lower interest rates considering that the volatility of the rupiah is relatively well maintained in one or two weeks," said Banjaran, quoted by Antara, in Jakarta, Wednesday, May 21.

Banjaran noted that from a global point of view, temporary truce or voltage of arms while the tariff wars of the United States (US) and China have reduced the escalation of tensions and uncertainties.

On the other hand, Indonesia needs a more pro growth rate as a catalyst to encourage growth so that adjustments from Bank Indonesia will greatly help the Indonesian economy.

According to Banjaran, the interest rate differential between Indonesian securities compared to countries in ASEAN is also still quite competitive.

Previously, the same thing was conveyed by Bank Mandiri Chief Economist Andry Asmoro on Monday (19/5) who saw the BI-Rate pruning room of 25 basis points (bps) from the level of 5.75 percent to 5.5 percent as early as the RDG in May 2025 if the rupiah was relatively stable.

"I think the momentum is right. Because, firstly, (BI-Rate decline) is to encourage or support Indonesia's economic growth," said Andry.

Another reason is that the pressure of the rupiah should not be as high as in the early period in the first quarter.

In addition, inflation is considered to remain low in the range target of Bank Indonesia. Finally, Indonesia's benchmark rate compared to other countries is also still relatively competitive.

However, unlike the majority consensus, Head of Bank Central Asia (BCA) Economist David Sumual projects that BI-Rate is maintained at the level of 5.75 percent in RDG May 2025, despite opportunities for future declines.

"(BI) is still focused on stability, triggered by uncertainty in tariff wars. The Fed also still maintains the benchmark interest rate," David said when contacted separately.

In the first quarter of 2025, Indonesia's GDP growth was recorded at 4.87 percent year on year (yoy), lower than the previous quarter which was 5.02 percent.

Domestic consumption growth slightly slowed to 4.89 percent yoy. Meanwhile, investment growth or Gross Fixed Capital Formation (PMTB) also decreased to 2.12 percent yoy.

Meanwhile, government spending recorded a contraction of 1.38 percent yoy after the previous year being boosted by election activities.

"There are indications of a slowdown in consumption, but it is more due to high base effect (Last year's election) and government spending that has not been optimal," said David.