CHAIRMAN of the Indonesian Employers’ Association (Apindo), Shinta Widjaja Kamdani, said that since successfully controlling inflation to the target level, Indonesia actually has no interest in maintaining high interest rates as they currently exist.
“The only reason interest rates are at such a high level now is external factors, particularly the need to create competitive interest rates in the global market to attract investment. foreign direct investment (FDI) and maintaining the stability of the rupiah,” said Shinta when contacted on Friday (13/9).
Shinta also said that with the recent strengthening trend of the rupiah exchange rate against the United States (US) dollar and the strengthening of foreign exchange reserves until August, the risk that could arise from the decrease in Bank Indonesia’s (BI) benchmark interest rate should be lower than before.
As is known, currently BI is still maintaining its benchmark interest rate at 6.25%. Meanwhile, he continued, The Fed itself in its last statement has stated that it will lower its benchmark interest rate in the near future. Thus, Shinta assessed that BI should also be able to be more flexible in lowering interest rates at the next BI board of governors (RDG) meeting.
“We also strongly support if BI can immediately lower the benchmark interest rate because this will be very positive in stimulating the performance of the real sector,” he concluded. (J-3)
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Indonesia GDP growth
Table of Contents
Indonesia’s Interest Rate: Balancing Inflation Control and Economic Growth
In recent years, Indonesia’s interest rate has been a topic of discussion among economists and policymakers. The country’s central bank, Bank Indonesia (BI), has been raising its benchmark interest rate to combat inflation and maintain the stability of the rupiah. However, with the recent strengthening trend of the rupiah exchange rate, there are calls to lower the interest rate to promote economic growth.
Current Interest Rate Landscape
As of 2024, the benchmark interest rate in Indonesia stands at 6.25% [[3]]. This is higher than the 3.50% recorded at the end of 2021 [[1]]. In fact, the interest rate has been averaging around 6.41% from 2005 to 2024 [[2]]. The recent hike in interest rate is seen as a move to shore up the weak rupiah, which has been experiencing a slump in recent months [[3]].
Reasons for High Interest Rates
According to Shinta Widjaja Kamdani, Chairman of the Indonesian Employers’ Association (Apindo), the high interest rates are largely due to external factors. She stressed that Indonesia has successfully controlled inflation to the target level, and there is no need to maintain high interest rates. The main reason for the high rates is to create competitive interest rates in the global market to attract foreign direct investment (FDI) and maintain the stability of the rupiah [[div]].
Calls for Lower Interest Rates
Shinta Widjaja Kamdani also expressed her support for a lower interest rate, citing the recent strengthening trend of the rupiah exchange rate against the US dollar and the strengthening of foreign exchange reserves until August. She believes that the risk associated with decreasing the benchmark interest rate should be lower, and a rate cut could promote economic growth [[div]].
Impact on Economic Growth
High interest rates can have a significant impact on economic growth. They can lead to higher borrowing costs for businesses and individuals, which can reduce investment and consumption. This, in turn, can slow down economic growth and even lead to a recession. On the other hand, low interest rates can stimulate economic growth by encouraging investment and consumption.
Conclusion
Indonesia’s interest rate has been a topic of discussion among policymakers and economists in recent years. While the high interest rate is seen as necessary to combat inflation and maintain the stability of the rupiah, there are calls to lower the rate to promote economic growth. With the recent strengthening trend of the rupiah exchange rate, there is a strong case for a lower interest rate. However, the decision to lower the interest rate will depend on various factors, including the country’s economic growth prospects and inflation rate.
References
[1] https://www.focus-economics.com/country-indicator/indonesia/interest-rate/
[2] https://tradingeconomics.com/indonesia/interest-rate
[3] https://asia.nikkei.com/Economy/Indonesia-hikes-key-interest-rate-to-6.25-as-rupiah-slumps
[[div]]Image source: Mediaindonesia.com
Indonesia interest rate historical data
Indonesia’s Interest Rate: Balancing Inflation Control and Economic Growth
In recent years, Indonesia’s interest rate has been a topic of discussion among economists and policymakers. The country’s central bank, Bank Indonesia (BI), has been raising its benchmark interest rate to combat inflation and maintain the stability of the rupiah. However, with the recent strengthening trend of the rupiah exchange rate, there are calls to lower the interest rate to promote economic growth.
Current Interest Rate Landscape
As of 2024, the benchmark interest rate in Indonesia stands at 6.25% [[3]]. This is higher than the 3.50% recorded at the end of 2021 [[1]]. In fact, the interest rate has been averaging around 6.41% from 2005 to 2024 [[2]]. The recent hike in interest rate is seen as a move to shore up the weak rupiah, which has been experiencing a slump in recent months [[3]].
Reasons for High Interest Rates
According to Shinta Widjaja Kamdani, Chairman of the Indonesian Employers’ Association (Apindo), the high interest rates are largely due to external factors. She stressed that Indonesia has successfully controlled inflation to the target level, and there is no need to maintain high interest rates. The main reason for the high rates is to create competitive interest rates in the global market to attract foreign direct investment (FDI) and maintain the stability of the rupiah [[div]].
Calls for Lower Interest Rates
Shinta Widjaja Kamdani also expressed her support for a lower interest rate, citing the recent strengthening trend of the rupiah exchange rate against the US dollar and the strengthening of foreign exchange reserves until August. She believes that the risk associated with decreasing the benchmark interest rate should be lower, and a rate cut could promote economic growth [[div]].
**Impact on