Jakarta. Bank Indonesia (BI) has decided to maintain its benchmark interest rate at 6.25 percent, the deposit facility rate is set at 5.5 percent, while the lending facility rate remains at 7 percent.

"This decision is consistent with a pro-stability monetary policy as a preemptive and forward-looking step to ensure inflation remains within the target of 2.5±1 percent for 2024 and 2025," said BI Governor Perry Warjiyo at a press conference on Wednesday.

BI projects global economic growth to reach 3.2 percent in 2024, driven by strong performance in the US and European economies. Perry noted that US economic growth remains robust, supported by consumption and fiscal stimulus. US inflation in June 2024 was lower than expected, influenced by declines in energy and housing prices. This has led to expectations that the US Federal Reserve may lower its policy rates faster than previously projected by the end of 2024, amid sustained high yields on 10-year US Treasury bonds due to the government's budget deficit needs.

"Global financial market uncertainty remains high amid strong prospects for the world economy," Warjiyo added during the press conference.

On the domestic front, Indonesia's economic growth is supported by robust domestic demand, with second-quarter 2024 growth driven by household consumption and investment. Exports have risen, propelled by increased shipments of manufacturing and mining products, especially metals and steel, to major trading partners such as India and China.

Growth for 2024 is projected to be between 4.7 percent and 5.5 percent.

Previously, senior economist and LPPI Associate Faculty member Ryan Kiryanto had predicted that Bank Indonesia would maintain its benchmark rate at 6.25 percent. This outlook is based on domestic economic indicators and global economic conditions.

"Given the primary consideration to maintain the stability of the rupiah against the US dollar in line with the 2024 budget assumptions, the logical and tactical choice is for BI to keep the benchmark rate at 6.25 percent while awaiting the Fed's decision, which may result in a rate cut this September," Ryan concluded.