Bank Indonesia (BI) has reduced its benchmark interest rate by 25 basis points from 6.00% to 5.75% during its Board of Governors Meeting on January 15, 2025. BI Governor Perry Warjiyo stated that this decision aims to balance stability and growth in the current economic climate.
Warjiyo highlighted the influence of U.S. fiscal policies and expectations surrounding the Federal Reserve's interest rate movements, particularly following the election of Donald Trump. He noted that the U.S. fiscal deficit is projected at 7.7%, which could impact U.S. Treasury yields.
Inflation in Indonesia remains low, nearing the target range of 2.5±1%. The low inflation rate allows for further interest rate reductions. As of January 14, 2025, the Indonesian rupiah has only weakened by 1% against the U.S. dollar, performing better than several regional currencies.
Additionally, BI revised its economic growth forecast for Indonesia in 2025 to a range of 4.7% to 5.5%, slightly lower than previous estimates. This adjustment reflects recent economic data and surveys conducted by BI.