Indonesia Macro Update - BI Rate Update 19 Mar 2025
KBVS MACRO UPDATE
Wednesday, 19 March 2025
Bank Indonesia Maintains BI Rate at 5.75%, Balancing Growth and Stability Amid Global Dovish Trends
As anticipated, Bank Indonesia (BI) decided to keep the BI Rate unchanged at 5.75% during this month’s Board of Governors Meeting (RDG). Bank Indonesia continues to optimize macroprudential policies and the payment system to support sustainable economic growth, particularly through macroprudential liquidity incentives (KLM) that encourage credit allocation to priority sectors and digitalization of the payment system.
Despite these developments, we concur with Bank Indonesia’s assessment that Indonesia’s economic fundamentals remain intact.
Globally, markets are awaiting the Federal Open Market Committee (FOMC) decision later tonight, with expectations that the Federal Reserve will maintain its policy rate.
Looking ahead, we expect the Rupiah to remain undervalued while awaiting the materialization of ongoing structural economic adjustments. Consequently, we believe BI will maintain the BI Rate until these structural changes take effect, which we anticipate will become more evident by the end of the first half of 2025. In the meantime, domestic purchasing power may remain under pressure, although this could be partially offset by the government’s expanded free nutritious meal program in the coming quarters. As a result, we expect core inflation to remain stable, with Indonesia’s economic growth projected at 4.9% YoY in the first quarter of 2025.
Regards,
Fikri C Permana