Economists Urge Bank Indonesia to Hold Benchmark Rate at 5.75%

TEMPO.CO, Jakarta - The Institute for Economic and Social Research at the University of Indonesia's Faculty of Economics and Business (LPEM FEB UI) has recommended that Bank Indonesia maintain its benchmark interest rate at 5.75 percent. The suggestion comes ahead of the central bank's Board of Governors Meeting (RDG), set to conclude later today, Wednesday, May 21.

"Given the lingering external risks, Bank Indonesia needs to hold the BI Rate at 5.75 percent and remain cautious until global conditions become more predictable," wrote LPEM FEB UI economist Teuku Riefky in the latest release of the Macroeconomic Analysis Series, published Tuesday, May 20.

Riefky noted that despite persistent uncertainty linked to U.S. President Donald Trump's tariff policies, the rupiah strengthened by 1.70 percent, appreciating from Rp16,795 to Rp16,510 per US dollar between mid-April and mid-May. This rebound was supported by easing trade tensions and Bank Indonesia's intervention to stabilize the currency.

Additionally, headline inflation in April 2025 rose to 1.95 percent year-on-year, up from 1.03 percent in March. Despite the increase, inflation remains within Bank Indonesia's target range of 1.5 to 3.5 percent. The uptick followed the expiration of a 50 percent electricity discount for households with power capacity below 2,200 VA.

"Core inflation also increased, driven by rising gold and car prices," Riefky added.

He went on to say that the current inflation figures and the rupiah's stability suggest there may be room for monetary easing. However, he cautioned that it remains unclear whether the recent stability is sustainable or merely temporary.

At its April meeting, Bank Indonesia had opted to keep the benchmark interest rate steady. "The BI Board of Governors Meeting on April 22 and 23, 2025 decided to maintain the BI Rate at 5.75 percent," Governor Perry Warjiyo said during a press conference on Wednesday, April 23, 2025. According to Perry, the central bank continues to monitor inflation and growth outlooks closely in order to assess the potential for future rate cuts.

Ilona Estherina contributed for this article.

Editor’s Choice: Bank Indonesia Urged to Be Cautious as Foreign Reserves Decline

Click here to get the latest news updates from Tempo on Google News

Indonesia Predicts Weaker Rupiah in 2026 to Rp16,900 Against US Dollar

12 jam lalu

UNJ Sociologist: State Plays Role in Creating Organized Thuggery

2 hari lalu

VP Gibran Acknowledges Backlash Over Soaring QRIS Users

2 hari lalu

State University Entrance Fees Reaching Hundreds of Millions; Govt Responds

6 hari lalu

Bank Indonesia Urged to Be Cautious as Foreign Reserves Decline

8 hari lalu

Indonesia's Job Availability Index Reflects Employment Challenges, Says Economist

9 hari lalu

Indonesia's Rupiah Drops to 16,520 per US Dollar; Further Decline Expected

11 hari lalu

Rupiah Ends Trading Up at 16,502 per US Dollar

12 hari lalu

Bank Indonesia's Monetary Maneuvers Narrowed as Fed Retains Benchmark Rate

12 hari lalu

Bank Indonesia Predicts The Fed Will Hold Interest Rates

12 hari lalu