Bank Indonesia (BI) announced its decision to keep its benchmark interest rate at 6% during the November 2024 monetary policy review. This move aligns with the central bank's focus on stabilizing the rupiah in response to global uncertainties and geopolitical developments, particularly after the recent U.S. election.   

 

The central bank also maintained the deposit facility rate at 5.25% and the lending facility rate at 6.75%. BI Governor Perry Warjiyo emphasized that the decision was consistent with the monetary policy goals of maintaining inflation within the 2.5% ±1% target range for 2024 and 2025 while supporting sustainable economic growth.   

 

“The focus of monetary policy is directed at strengthening the stability of the rupiah exchange rate from the impact of heightened geopolitical and global economic uncertainty with the political developments in the United States,” Mr. Warjiyo said, as quoted on BI’s official website.   

 

The rupiah has depreciated since October, primarily due to the strengthening US dollar and capital flight toward dollar-denominated assets following the US election. Warjiyo assured that the situation remains manageable, with all monetary tools being deployed to maintain exchange rate stability.   

 

Economists Predict No Immediate Rate Cuts   

 

The decision to hold rates was widely expected, with 25 of 34 economists surveyed by Reuters forecasting BI’s move. Economists highlighted that while Indonesia’s inflation outlook provides room for potential rate cuts, global uncertainties necessitate a focus on financial stability.   

 

DBS Bank senior economist Radhika Rao noted, “They will continue to deploy tools available under the triple intervention strategy to prevent excessive weakness in the rupiah, while gearing up the interest rate policy to keep FX stability.”   

 

Similarly, Teuku Riefky, a macroeconomics researcher at the Institute for Economic and Social Research at the Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), stated that maintaining the current rate provides flexibility for future adjustments. “At present, a benchmark interest rate cut is not urgent. Maintaining the rate will allow more room for potential reductions in the future,” Mr. Riefky said, as quoted by Katadata.   

 

Global and Domestic Factors in Focus   

 

BI’s decision comes amid changing global dynamics, including increased risks of geopolitical fragmentation and evolving trade policies under the incoming U.S. administration. Mr. Warjiyo acknowledged these factors during a press briefing, stating, “Global dynamics have changed with economic, geopolitical, and trade fragmentation risks all rising.”   

 

Domestically, Indonesia’s annual inflation rate in October stood at 1.71%, the lowest since November 2021. BI expects inflation to remain within its target range of 1.5% to 3.5%. Indonesia’s economic growth, recorded at 4.95% in the third quarter, also factors into BI’s decision-making.