In a decisive move to stabilize the exchange rate of the Indonesian rupiah and combat inflationary pressures, Bank Indonesia has opted to maintain its policy interest rates. The central bank announced on Wednesday that its key rate will remain at 6.25%, while the deposit facility rate stays at 5.50%, and the lending facility rate is fixed at 7.00%.
This decision comes amidst a backdrop of changing economic conditions where stabilizing the rupiah has become a priority. Bank Indonesia outlined its strategy, indicating strong efforts to establish further stability in the exchange rate and deploying proactive measures to ensure inflation remains manageable.
The central bank's target for inflation is set at 2.5%, within a permissible variance of 1%, calculated based on the nation's consumer price index (CPI). Recent data indicates that inflation has begun to fall within the acceptable range. Specifically, the inflation rate for July showed a decrease, aligning with the target maintained by Bank Indonesia.
It was reported that the consumer price index inflation for July 2024 was recorded at 2.13% year-over-year, a notable decline from June 2024's inflation rate of 2.51%. However, it's important to note that the core inflation rate, which excludes certain fluctuating food and energy prices, observed a year-on-year increase of 1.95%, signaling that while overall inflation pressures may be easing, there are still underlying dynamics at play. In light of the recent trends, Bank Indonesia asserted the importance of remaining vigilant against potential future price increases.
The central bank stated, "Bank Indonesia continues to strengthen pro-stability monetary policy and improve policy synergies with the government to ensure that inflation in 2024 and 2025 remains under control within the target of 2.5% plus or minus 1%." This proactive approach underscores a commitment to economic stability despite fluctuating market conditions. Looking ahead, Bank Indonesia projects the national economy to grow between 4.7% and 5.5% in 2024, thereby reinforcing the outlook expressed in previous forecasts.
This growth forecast is crucial as it reflects the central bank's expectation of underlying economic resilience, even amidst the challenges posed by inflationary pressures and the need for currency stabilization. The concerted efforts by the central bank are aimed at ensuring a balanced economic environment that fosters sustainable growth while managing inflation effectively..