TEMPO.CO, Jakarta - The United States central bank, or The Federal Reserve, known as The Fed, has decided to hold the benchmark interest rates in the range of 4.25 to 4.5 percent, a move that senior economist Fithra Faisal Hastiadi considers narrowing down Bank Indonesia's maneuvers.
The chief economist from PT Samuel Sekuritas Indonesia explained that in the short term, The Fed's decision might prevent a jump in market volatility, but at the same time signals that interest rate cuts will not occur in the near future. "Thus, the space is very narrow for Bank Indonesia to loosen its monetary policy," said Fithra in a written statement on Thursday, May 8, 2025.
The current geopolitical situation, according to Fithra, still carries the risk of pressure on rupiah and the outflow of foreign capital from Indonesia.
Indonesia's economic growth also slowed down in the first quarter of 2025 to 4.87 percent year-on-year.
Samuel Sekuritas also predicts that Bank Indonesia will retain the benchmark interest rate at 5.75 percent. "BI is unlikely to lower interest rates without facing the risk of rupiah depreciation and inflation on imported goods, especially due to higher logistics costs as a result of tariff policies," said Fithra.
Bank Indonesia (BI) believes that Indonesia's economic growth of 4.87 percent is still quite high for investors. Head of the Monetary and Securities Asset Management Department of Bank Indonesia, Erwin Gunawan Hutapea, said market players are still looking to invest in Indonesia.
Erwin admitted that since the beginning of the year, Bank Indonesia has recorded a significant outflow of foreign capital from Indonesia, especially from the stock market. "But in the recent auctions, when we look at the State Bonds (SBN) market and the Indonesian Rupiah Securities (SRBI), inflows have begun to occur," Erwin told reporters at the Bank Indonesia office in Central Jakarta on Wednesday, May 7, 2025.
Meanwhile, The Fed made the decision to hold interest rates due to increased risks of rising unemployment and inflation. "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run," as per an official statement from The Fed cited from federalreserve.gov.
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