Respons Kondisi Ekonomi, Bank Indonesia Turunkan Suku Bunga

Summary

In a discussion on Kompas Business, Bank Indonesia's September 2024 decision to lower the BI rate by 25 basis points to 6% is highlighted. The decision is based on controlled inflation forecasts for 2024-2025 and decreased global monetary policy uncertainty. Juli Budi Winantia, Director of Monetary and Economic Policy, explains how the U.S. Federal Reserve's rate cuts and slowing U.S. economic growth influenced the move. Additionally, Indonesia’s strong economic fundamentals and rising foreign capital inflows have supported the Rupiah's strength. The discussion covers economic growth forecasts and efforts to sustain stability while encouraging further growth.

Takeaways

• 📉 The Bank of Indonesia (BI) reduced the BI rate by 25 basis points to 6%, based on controlled inflation expectations for 2024 and 2025.
• 🌍 Global monetary policy uncertainty has eased, with reduced inflationary pressures globally.
• 💸 The Federal Reserve recently reduced its Federal Funds Rate (FFR) by 50 basis points, aligning with BI's earlier actions and expectations of faster and larger cuts.
• 📊 Indicators in the U.S. show economic slowdown, declining inflation, and rising unemployment, supporting the expectation of faster FFR reductions.
• 📉 The yield curve in the U.S. has normalized, with short-term yields decreasing more than long-term ones, indicating less market uncertainty.
• 🌍 Foreign investment in emerging markets, including Indonesia, is increasing, supported by declining U.S. yields.
• 💰 Foreign portfolio investments in Indonesia reached $11.4 billion by September 2024, contributing to the strengthening of the Indonesian rupiah.
• 💪 The rupiah has strengthened by 1.7% since the end of August 2024, outperforming currencies of neighboring countries like India and Korea.
• 🏦 BI's focus is on maintaining stable and low inflation, projected to remain within the 2.5% ±1% range for both 2024 and 2025.
• 💵 BI aims to stimulate credit growth and economic expansion through lower interest rates, while also ensuring stability in exchange rates and supporting long-term growth.

Q & A

What decision did Bank Indonesia make in the meeting on September 17-18, 2024?

Bank Indonesia decided to lower the BI rate by 25 basis points to 6%, reflecting a stable inflation outlook for 2024 and 2025.

What are the inflation targets mentioned for 2024 and 2025?

The inflation targets for 2024 and 2025 are set within a range of 2.5% plus or minus 1%, indicating controlled inflation levels.

How did global inflation and the US monetary policy impact Bank Indonesia’s decision?

Bank Indonesia's decision was influenced by easing global inflation pressures and reduced uncertainty around US monetary policy, as the Federal Reserve's actions became clearer.

Why did Bank Indonesia expect a faster and larger reduction in the Fed Fund Rate (FFR)?

Bank Indonesia anticipated a faster and larger reduction in the FFR due to the slowing economic growth, declining inflation, and rising unemployment in the United States.

What impact has the Fed's monetary policy had on global financial markets?

The declining yields on US government bonds, particularly the two-year bonds, and the inversion of the yield curve correcting itself have made emerging markets, including Indonesia, more attractive for foreign investment.

What factors have contributed to the recent strengthening of the Indonesian Rupiah?

The Rupiah has strengthened due to increased foreign capital inflows, particularly in portfolio investments across various financial instruments, and positive domestic economic fundamentals.

What is the projected growth rate for Indonesia’s economy in 2024 according to Bank Indonesia?

Bank Indonesia projects the Indonesian economy to grow between 4.7% and 5.5% in 2024, driven by investment, household consumption, non-oil exports, and government spending.

How does Bank Indonesia plan to support economic growth through its monetary policy?

Bank Indonesia plans to support economic growth by adjusting its monetary policy to not only focus on stability but also on promoting growth, such as by lowering the BI rate to encourage bank lending and stimulate economic activity.

What measures is Bank Indonesia taking to ensure the stability of the Rupiah?

Bank Indonesia is employing several strategies to maintain Rupiah stability, including interventions in the foreign exchange and bond markets, optimizing monetary instruments, and maintaining economic fundamentals.

How is Bank Indonesia coordinating with the government to drive economic growth?

Bank Indonesia is working closely with the government by aligning its macroprudential, payment systems, and monetary policies to support economic growth, such as by ensuring the BI rate reduction is aligned with government objectives.