Economists Estimates BI To Hold Reference Interest Rate 5.75 Percent By The End Of 2023

JAKARTA - Bank Mandiri economist Faisal Rachman estimates that Bank Indonesia will maintain the BI 7-Day Reverse Repo Rate at 5.75 percent by the end of 2023.

"Overall, we still expect Bank Indonesia to maintain a benchmark interest rate of 5.75 percent until the remainder of 2023 while remaining wary of future global economic developments that are still full of uncertainty," said Faisal in an official statement, quoted from Antara, Friday, May 26.

He views that the space for Bank Indonesia to cut the benchmark interest rate is getting narrower, both due to external and internal factors.

From an external perspective, it is estimated that Bank Indonesia will still face challenges in the form of uncertainty in the direction of global interest rate policy, especially in the United States, which is still facing relatively high inflation.

The United States central bank's benchmark interest rate The Fed is quite high for a longer period of time, amid stubborn inflation, along with the current US debt ceiling issue, poses a higher risk of economic recession, he said.

Meanwhile, from the domestic side, inflation continues to decline, but increasing uncertainty in the global financial market puts pressure on the stability of the rupiah exchange rate which has the potential to increase the price of imported goods.

El Nino also has the potential to occur in the second semester of 2023 which can make food prices rise so that inflation also increases.

"By looking at developments on both sides, we continue to see that the space for Bank Indonesia to cut the benchmark interest rate is getting narrower. We still see that the space to cut interest rates will be open in the first quarter of 2024," he said.