BI Maintains 6.25% Benchmark Interest Rate in July 2024

Bank Indonesia (BI) maintained its benchmark interest rate, the BI 7-Day Reverse Repo Rate (BI7DRR), at 6.25% in July 2024. This decision was made during the BI Board of Governors meeting on July 16-17, 2024.

Accordingly, the deposit facility interest rate remains at 5.5%, and the lending facility interest rate at 7%. BI stated that this decision is consistent with its pro-stability monetary policy, a pre-emptive and forward-looking measure to ensure inflation remains within the target range of 2.5% ± 1% in 2024 and 2025.

"In the short term, monetary policy focuses on strengthening the effectiveness of rupiah exchange rate stabilization and attracting foreign capital inflows," BI wrote on its website on Wednesday (July 17, 2024).

Meanwhile, macroprudential and payment system policies continue to support sustainable economic growth. A loose macroprudential policy is being maintained to encourage bank lending and financing to businesses and households.

The rationale behind setting the benchmark interest rate considers not only domestic economic factors, such as economic growth and the balance of trade, but also external conditions, particularly those affecting the rupiah exchange rate.

BI noted that global financial market uncertainty remains high amid a strong global economic outlook. Global economic growth in 2024 is projected at 3.2%, driven by the United States (US) and Europe.

US economic growth remains robust, supported by consumption and fiscal stimulus. The European economy is projected to grow higher, driven by improved exports and investment. Meanwhile, the Chinese economy remains weak, affected by sluggish domestic demand.

"The still-high uncertainty in global financial markets and unresolved geopolitical tensions have resulted in relatively limited capital flows to developing countries," BI stated.

This development implies the need for continued strengthening of policy responses to mitigate the negative impacts of spillovers from global uncertainty on the economies of developing countries, including Indonesia.