In light of the persistent need to guard against inflation, Bank Indonesia announced that it would keep its policy interest rates unchanged during its recently concluded two-day policy meeting. This decision reinforces its commitment to maintaining economic stability while addressing inflationary pressures.
The central bank has set its key interest rate at 6.00%, while the deposit facility rests at 5.25% and the lending facility is at 6.75%. The central bank emphasized that this decision aligns with its monetary policy direction, aiming to keep inflation within the target range of 2.5% plus or minus 1% for the years 2024 and 2025, thereby supporting sustainable economic growth.
Furthermore, it highlighted the importance of stability in the exchange rate of the nation’s currency, the rupiah. Bank Indonesia committed to enhancing the stability of the rupiah amidst escalating global economic uncertainties, which are influenced by U.S. policy shifts and rising geopolitical tensions in various regions.
Despite the challenges posed by these international factors, the bank expresses relatively optimistic forecasts for Indonesia's gross domestic product (GDP) growth. Currently, Indonesian economic growth projections for 2024 are estimated to fall between 4.7% and 5.5%, with an expected increase to 4.8% to 5.6% in 2025.
Bank Indonesia remains confident that inflation rates will stay within the set targets in both 2024 and the following year. In November, the nation’s consumer price index (CPI) witnessed a modest rise of 1.55% year-over-year; concurrently, the core inflation rate, which excludes certain volatile food items and government-controlled prices, recorded a higher increase of 2.26% year-over-year.
The annual inflation target set by the bank for the nation’s CPI remains at 2.5% plus or minus 1%. The central bank asserts that adequate economic capacity exists to cater to rising demand, which should assist in controlling CPI inflation moving forward..