Senior economist, Ryan Kiryanto, said that Bank Indonesia is believed to be lowering interest rates (BI Rate) in the near future. This is because there are several driving factors that can make BI Rate down
One of them, he predicted that in the near future the Fed would loosen its monetary policy by lowering Fed Fund Rate by 25-50 basis points.
“But the majority’s desire to reduce it is 50 basis points, this is related to the meeting of the Board of Governors (RDG) of Bank Indonesia (BI) which will maintain (the benchmark interest rate) at 6.25% or will reduce it to 6%,” said Ryan when met in Jakarta on Thursday (12/9).
Other factors include ongoing layoffs, the manufacturing PMI which is also below the threshold of 50, and the most serious consideration is the occurrence of deflation for 4 consecutive months.
“Deflation for 4 consecutive months has shown a strong signal that people’s consumption activities are indeed decreasing or weakening. Who is weakening? According to BPS, those who are in the middle class category,” said Ryan.
The middle class, Ryan continued, are those who spend their money every day with an average of US$3. He said, some of them already downgradeno longer in the middle class category but in the pre-intermediate class category.
Also read: Pressure Eases, BI Advised to Hold Benchmark Interest Rate
“That’s why some of the business sectors that are under pressure include restaurants. Now (formal) restaurants are starting to decrease. Our young people, the millennials, who are middle class, still eat crispy chicken, but chicken crispy cart version, the important thing is to eat crispy because our middle class is sensitive to price,” he explained.
Ryan believes that if BI later lowers the benchmark interest rate to 6%, sooner or later it will be transmitted to the loan interest sector or credit interest. That way, business actors and even individuals can be stimulated to apply for credit, both working capital credit and investment credit for business actors, and also consumer credit for individuals.
“If the interest rate can go down, this provides a stimulus or encouragement to the banking sector to also adjust interest rates in accordance with BI’s policy,” he concluded. (J-3)
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Indonesia interest rate
Table of Contents
The Future of Indonesia’s Interest Rate: A Comprehensive Analysis
As the global economy continues to evolve, Indonesia’s interest rate landscape is also undergoing significant changes. According to senior economist Ryan Kiryanto, Bank Indonesia (BI) is likely to lower its interest rate in the near future, driven by several key factors. This article will delve into the driving forces behind this anticipated move and explore the implications for the Indonesian economy.
Deflation: A Key Driver of Lower Interest Rates
One of the primary factors contributing to the potential decrease in interest rates is the ongoing deflation in Indonesia. Deflation, which has persisted for four consecutive months, has led to a decline in people’s consumption activities, particularly among the middle class. This decrease in consumption has resulted in a slowdown in economic growth, making it essential for BI to consider lowering interest rates to stimulate economic activity.
Fed Fund Rate: A Global Influence
Another factor influencing BI’s decision is the expected loosening of monetary policy by the Federal Reserve. The Fed is anticipated to lower its Fed Fund Rate by 25-50 basis points, which will have a ripple effect on global interest rates. This move is likely to put pressure on BI to reduce its interest rate to remain competitive and maintain economic stability.
Additional Factors: Layoffs and Manufacturing PMI
In addition to deflation and the Fed Fund Rate, other factors are also contributing to the potential decrease in interest rates. Ongoing layoffs and a manufacturing PMI below the threshold of 50 are both indicators of a slowing economy, further supporting the case for a rate cut.
Current Interest Rate Scenario
As of June 2024, the BI interest rate remains unchanged at 6.25%, in line with market expectations [[3]]. However, with the anticipated decrease in interest rates, BI may reduce its benchmark rate to 6% or maintain it at 6.25% [[2]].
Historical Context
It is essential to consider the historical context of BI’s interest rate. In 2022, the BI 7-day Reverse Repo Rate ended at 5.50%, higher than the 3.50% value at the end of 2021 and lower than the 7.50% reading a decade earlier [[1]]. This highlights the dynamic nature of interest rates and the need for BI to adapt to changing economic conditions.
Implications of a Rate Cut
A decrease in interest rates would have significant implications for the Indonesian economy. It would make borrowing cheaper, stimulating economic growth and investment. However, it could also lead to a depreciation of the Indonesian rupiah and potentially increase inflation.
Conclusion
the future of Indonesia’s interest rate is likely to be shaped by various factors, including deflation, the Fed Fund Rate, layoffs, and manufacturing PMI. As BI considers its next move, it is essential to carefully weigh the implications of a rate cut on the economy. With the global economy in a state of flux, Indonesia’s interest rate will play a crucial role in determining the country’s economic trajectory.
References:
Indonesia interest rate
The Future of Indonesia’s Interest Rate: A Comprehensive Analysis
As the global economy continues to evolve, Indonesia’s interest rate landscape is also undergoing significant changes. According to senior economist Ryan Kiryanto, Bank Indonesia (BI) is likely to lower its interest rate in the near future, driven by several key factors. This article will delve into the driving forces behind this anticipated move and explore the implications for the Indonesian economy.
Deflation: A Key Driver of Lower Interest Rates
One of the primary factors contributing to the potential decrease in interest rates is the ongoing deflation in Indonesia. Deflation, which has persisted for four consecutive months, has led to a decline in people’s consumption activities, particularly among the middle class. This decrease in consumption has resulted in a slowdown in economic growth, making it essential for BI to consider lowering interest rates to stimulate economic activity.
**Fed Fund Rate: A Global Influence
