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BI keeps rate unchanged but open to cut at right moment
Bank Indonesia will keep eye on the Federal Funds Rate (FFR), US Treasury yields and the state of the ongoing Middle East conflict, among other indicators.
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A Bank Indonesia (BI) sign on a building at the central bank's headquarters in Jakarta is pictured on July 17, 2024. (JP/Deni Ghifari)
B
ank Indonesia (BI) has kept its benchmark interest rate unchanged following a Wednesday policy meeting but has said it is prepared to make a cut when the time is right, as it seeks to manage the rupiah exchange rate amid heightened geopolitical tensions.
Following Wednesday’s monthly policy meeting, BI Governor Perry Warjiyo announced that the BI Rate would remain at 6 percent to ensure exchange rate stability.
“We see space for interest rate reduction going forward. The timing and magnitude, we will measure them. It will be data-dependent. The direction is [toward a further cut]. For this month, because of global uncertainty, we will focus first on rupiah exchange rate stability,” said Perry.
In September, BI cut its key interest rate by 25 basis points (bps), the first cut after it embarked on a series of rate hikes starting in August 2022 that lifted the domestic benchmark for borrowing costs by a total of 250 bps to a high of 6.25 percent in April of this year.
In September as well, the US Federal Reserve cut its benchmark rate by 50 bps, hours after BI lowered its rate by half that amount.
Read also: BI cuts benchmark interest rate by 25 basis points
BI believes its US counterpart will cut the Federal Funds Rate (FFR) by 25 bps in November and another 25 bps in December, which would bring the year’s total cuts to 100 bps. Next year, the central bank expects the FFR to be cut another three or four times, for a total reduction of 75 to 100 bps.
