Jakarta, Indonesia Sentinel — Bank Indonesia (BI) has decided to maintain its benchmark interest rate, the BI 7-Day Reverse Repo Rate (BI 7DRRR), at 6% following its Board of Governors meeting on October 15-16, 2024. The decision came as no surprise to many economists, who had anticipated the rate would remain unchanged after a 25-basis point cut in the previous month.
“Bank Indonesia’s Board of Governors has decided to keep the BI rate at 6%,” BI Governor Perry Warjiyo announced during a press conference on Wednesday, October 16.
In addition to holding the benchmark rate, BI adjusted other key interest rates. The Deposit Facility rate was lowered to 5.25%, while the Lending Facility rate was cut to 6.75%.
Warjiyo explained that the decision aligns with BI’s broader monetary policy objectives, ensuring inflation remains under control within the target range of 2.5%, plus or minus 1%, for 2024 and 2025. Indonesia’s headline inflation stood at a low 1.84% year-on-year in September 2024, reflecting stability across all components.
The policy is aimed at supporting sustainable economic growth while also maintaining the stability of the rupiah, as the rupiah remains under pressure.
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As of mid-October 2024, the currency had weakened by 2.82% against the U.S. dollar compared to the previous month. Warjiyo emphasized that BI is employing all monetary instruments at its disposal, including optimizing pro-market strategies such as the SRBI, SVBI, and SUVBI instruments, to attract foreign capital inflows and bolster the rupiah’s exchange rate.
In the short term, monetary policy focus remains on rupiah stability due to increased uncertainty in global financial markets. While looking ahead, BI will continue to assess the potential for further interest rate cuts, depending on inflation trends, the rupiah’s performance, and Indonesia’s economic growth outlook.
Future Rate Cuts
Bank Indonesia Governor Warjiyo confirmed that there is still room for benchmark interest rate reductions in the future. However, he stressed that any future adjustments will depend on several key factors, including inflation data, movements in the rupiah’s exchange rate against the U.S. dollar, and the country’s overall economic performance.
“Going forward, Bank Indonesia will carefully consider the possibility of lowering the policy rate while closely monitoring inflation prospects, the rupiah’s exchange rate, and economic growth,” Warjiyo said.
(Raidi/Agun)
