[FULL] Dialog - Jaga Stabilitas, Bank Indonesia Turunkan BI Rate - [ Zona Bisnis ]

Summary

Bank Indonesia has lowered the BI rate by 25 basis points to 6.00%, with similar cuts for deposit and lending facilities. The decision follows trends in the U.S. Federal Reserve's rate cuts, driven by economic slowdown and lower inflation. The central bank expects further rate cuts in the U.S., which could influence Indonesian monetary policy. With a strengthening Rupiah and stable inflation, Bank Indonesia is focused on maintaining exchange rate stability while promoting economic growth. Domestic consumption, strategic investment, and currency intervention are key pillars in this approach.

Takeaways

• 📉 Bank Indonesia lowered its BI rate by 25 basis points to 6.00% following its September 2024 meeting.
• 🏦 The deposit facility rate was reduced to 5.25%, and the lending facility rate was lowered to 6.75%.
• 🇮🇩 Bank Indonesia closely monitors inflation trends and economic growth to decide on future rate cuts.
• 🇺🇸 The Federal Reserve's actions, including a potential further 75-100 basis points reduction in the Fed funds rate, are expected to influence global and Indonesian financial markets.
• 📊 The weakening US labor market, slowing economic growth, and declining inflation are key factors driving US rate cuts.
• 💹 The yield curve in the US, particularly for short-term and long-term bonds, has started to normalize as market uncertainty declines.
• 💱 The strengthening of the Indonesian Rupiah is attributed to both the weakening of the US dollar and positive domestic economic factors.
• 🍽️ Indonesia’s inflation deflation is mainly driven by a decline in volatile food prices due to increased food supply from harvests.
• 🌱 Core inflation remains stable, reflecting strong economic fundamentals in Indonesia, with projected growth between 4.7% and 5.5% for 2024.
• 🤝 Bank Indonesia works in coordination with the government to support economic growth and maintain exchange rate stability while keeping inflation low.

Q & A

What was the decision made by the Bank Indonesia's Board of Governors during their meeting on September 17-18, 2024?

The Bank Indonesia's Board of Governors decided to lower the BI rate by 25 basis points to 6.00%, the deposit facility interest rate by 25 basis points to 5.25%, and the lending facility interest rate by 25 basis points to 6.75%.

How does Bank Indonesia's decision to lower interest rates compare to the Federal Reserve's actions?

While the Federal Reserve lowered its federal funds rate by 0.5%, Bank Indonesia's decision to lower rates by 0.25% was seen as a proactive measure, with expectations that the Federal Reserve might further lower rates, potentially prompting Bank Indonesia to follow suit.

What are the factors that influence the strengthening of the Indonesian Rupiah according to Bank Indonesia's perspective?

Bank Indonesia identifies two main factors influencing the strengthening of the Rupiah: global uncertainty reduction and the weakening of the US Dollar. These factors contribute to capital inflows into emerging markets, including Indonesia.

What is Bank Indonesia's projection for the Rupiah's value by the end of the year?

Bank Indonesia anticipates the Rupiah to remain stable with a tendency to strengthen, influenced by decreasing global uncertainty and improving domestic conditions.

How does deflation, as reported by BPS for five consecutive months, affect Bank Indonesia's economic growth projection?

Bank Indonesia assesses that deflation is largely influenced by volatile food inflation, which has been decreasing due to increased food supply. Meanwhile, core inflation, which is considered more permanent and fundamental, remains stable, reflecting a healthy economic growth.

What is Bank Indonesia's projection for Indonesia's economic growth by the end of 2024?

Bank Indonesia projects Indonesia's economic growth to be within the range of 4.7% to 5% for the year 2024, supported by ongoing investments in strategic national projects and favorable exports.

What steps is Bank Indonesia taking to ensure the stability of the Rupiah while also promoting economic growth?

Bank Indonesia is focusing on maintaining the stability of the Rupiah through various strategies, including market intervention in the spot and NDF forward markets, and supporting these efforts with pro-market monetary operations.

How does the cooperation between Bank Indonesia and the government play a role in economic stability?

Bank Indonesia and the government work together to implement macroprudential liquidity policies aimed at sectors that are highly productive and can absorb labor. They also coordinate to control food inflation and maintain financial system stability.

What is the role of consumption in Bank Indonesia's economic outlook?

Consumption, particularly by the middle and upper classes, is seen as a driving force for economic growth. Bank Indonesia has called for increased consumption to provide a boost to the overall economy.

How does the inverted yield curve mentioned in the script impact economic indicators?

The inverted yield curve, where long-term yields are lower than short-term yields, has disappeared in the latest developments, indicating a more positive outlook as short-term yields have decreased while long-term yields have decreased at a slower pace.

What is the significance of the strengthening of the US Dollar as reflected by the DXY index in the script?

The strengthening of the US Dollar, as indicated by the DXY index, has implications for global financial markets and capital flows. A high DXY index suggests a stronger US Dollar, which can affect emerging market currencies like the Rupiah.